Preamble

The House met at Half past Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BRITISH TRANSPORT COMMISSION BILL

[Queen's Consent, on behalf of the Crown, signified]

Read the Third time, and passed.

GLOSSOP WATER BILL

Read the Third time, and passed.

TOTTENHAM CORPORATION BILL [Lords]

GOVERNESSES BENEVOLENT INSTITUTION BILL [Lords]

Read a Second time, and committed.

Oral Answers to Questions — STATUS OF REFUGEES (U.N. CONVENTION)

Mr. Janner: asked the Secretary of State for Foreign Affairs whether he is now prepared to ratify the Convention relating to the Status of Refugees, in view of the fact that the United Kingdom's delegation to the Sixth Session of the General Assembly of the United Nations Organisation sponsored a resolution inviting States to become parties to that Convention.

The Minister of State (Mr. Selwyn Lloyd): The text of the Convention is at present being studied by Her Majesty's Government and by the Governments of overseas territories for the conduct of whose international relations Her Majesty's Government are responsible. Subject to certain reservations as provided for in Article 42, Her Majesty's Government hope to be in a position to submit an Instrument of Ratification to Parliament within a few months.

Mr. Janner: Would the right hon. and learned Gentleman try and expedite the

matter a little bit more than that, particularly in view of the fact that four major countries have already intimated their intention to ratify this very important Convention, that a large number of other countries will follow our example, and because we ourselves have sponsored this particular Convention?

Mr. Lloyd: I am aware of the matters to which the hon. Gentleman has referred. It is our desire that ratification should take place as quickly as possible, but there are a number of complicated matters which still have to be considered.

Oral Answers to Questions — DISARMAMENT COMMISSION

Mr. Sorensen: asked the Secretary of State for Foreign Affairs whether the United Nations Disarmament Commission has completed its collection of figures of the approximate arms expenditure of the nations of the world; and if he will press for its publication.

Mr. Selwyn Lloyd: The United Nations Disarmament Commission has not undertaken the collection of any such figures.

Mr. Sorensen: Will the right hon. and learned Gentleman reply to the last part of the Question about the publication of the figures?

Mr. Lloyd: As the figures are not being collected, it is difficult to see how they can be published. At the moment, quite frankly, our representative is not so interested in the financial particulars as in the other particulars which so far the Soviet Union have not supplied in any shape or form.

Mr. Sorensen: Does not the right hon. and learned Gentleman agree that the compilation of these figures would be extremely interesting to those interested in the question?

Mr. Lloyd: I do not think the financial aspect is as important as getting the other matters cleared up first.

Sir W. Smithers: Can my right hon. and learned Friend say why any figures which would be of service to the enemy should be published?

Mr. A. Henderson: asked the Secretary of State for Foreign Affairs whether he expects that the first report of the Disarmament Commission will be ready


by 1st June, as required by paragraph 7 of the Resolution of the General Assembly passed on 11th January, 1952; and what proposals have been made by Her Majesty's Government to the Commission for inclusion in the report.

Mr. Selwyn Lloyd: I understand that the Disarmament Commission will have its first report ready by 1st June. A general statement of principles on which a disarmament programme might be based was tabled by the American Delegation in the Commission on 24th April, and these were supported by Her Majesty's Government. Further proposals are in preparation, though I cannot yet say whether these will be tabled in time for inclusion in the report of 1st June.

Mr. Henderson: Can the right hon. and learned Gentleman say whether satisfactory progress has been made in these discussions?

Mr. Lloyd: No, I think it is the view of Her Majesty's Government that satisfactory progress has not been made. A great deal too much use of this Commission is being made for purposes of international propaganda, and in fact there was a refusal on the part of the Soviet delegation even to agree on the agenda until the end of March.

Mr. Noel-Baker: Would the Minister consider letting us have this first report in the form of a White Paper at an early date?

Mr. Lloyd: I will certainly bear that in mind.

Oral Answers to Questions — DISARMAMENT POLICY

Mr. Sorensen: asked the Secretary of State for Foreign Affairs if he will present a White Paper outlining Her Majesty's Government's disarmament policy and comparing it with the policy of the United States of America as expressed at the Second Disarmament Commission meeting in March last.

Mr. Selwyn Lloyd: The policy of Her Majesty's Government and of the United States Government on Disarmament is expressed in the terms of the resolution passed by the Sixth Session of the United Nations General Assembly on 11th January, 1952. This is annexed to Cmd. 8547 which deals with the work of the Assembly's session as a whole.

Mr. Sorensen: May I assume that, broadly speaking, Her Majesty's Government are in sympathy with the six points put forward by Mr. Ben Cohen on behalf of the American Government?

Mr. Lloyd: That is so.

Oral Answers to Questions — SUEZ CANAL (BRITISH TANKERS)

Mr. G. Jeger: asked the Secretary of State for Foreign Affairs whether the Egyptian Government are now allowing British tankers to pass through the Suez Canal.

Mr. Selwyn Lloyd: Large numbers of British tankers have been and are still passing to and fro through the Suez Canal. I presume therefore that the hon. Member is referring to the passage through the Canal of tankers bound for Haifa. So far as I am aware, the situation in this respect has not changed since the reply given by my right hon. Friend to the hon. Members for Darwen (Mr. Fletcher-Cooke) and Leicester, North-West (Mr. Janner), on 30th January.

Mr. Jeger: Is nothing being done to force the passage of these tankers through to Haifa? Is not the Minister aware that his right hon. Friend the Foreign Secretary, when he was in opposition, roared like a rabbit for resolute action, and even said that he would force them through with the protection of the Royal Navy? Is nothing being done to implement those promises and threats made by the Foreign Secretary when in opposition?

Mr. Lloyd: It would not be correct for Her Majesty's Government to take unilateral action to secure the implementation by Egypt of the Security Council's Resolution of 1st September, 1951.

Sir H. Williams: Have not we a statutory right to take our ships through the Suez Canal, a right established long before the United Nations was ever thought of, and why does not Her Majesty's Government assert their rights in this matter?

Mr. Lloyd: The reason why action has not been taken in this matter is that at the moment other negotiations are going on between this country and Egypt and it is not considered appropriate to raise this matter first.

Mr. Shinwell: Is it not true to say that these general negotiations between Her Majesty's Government and Egypt have been going on for many months and there does not appear likely to be an immediate solution? Why is it necessary to bring in other countries to solve a problem which primarily concerns only three countries, the State of Israel, Egypt, and ourselves? What is holding this up? Will not the Government be forthcoming about it?

Mr. Lloyd: I imagine that the present Government are actuated very much by considerations similar to those which actuated the late Government.

Oral Answers to Questions — ICELAND (FISHING DISPUTE)

Major Anstruther-Gray: asked the Secretary of State for Foreign Affairs whether he will now make a considered statement upon the Government of Iceland's attitude over fishing in Icelandic territorial waters.

Mr. Selwyn Lloyd: Yes, Sir. As the House is aware, a Note was addressed to the Icelandic Government on 2nd May objecting to the new Icelandic Fishery Regulations. Her Majesty's Government's objections were based on two grounds, namely (a) that one of the base lines is drawn in a manner contrary to the principles recently approved by The Hague Court and (b) that Iceland is not entitled to extend the breadth of her territorial sea, as the Regulations purport to do, from three to four miles. The Icelandic Government were asked to amend their Regulations, to take account of these objections. They have since replied, in a note dated 12th May, rejecting our request on both points.
The Icelandic reply has now been considered and Her Majesty's Government find themselves unable to accept the standpoint maintained by the Icelandic Government. A reply to this effect is in course of preparation and will be despatched shortly.
The Icelandic Government were warned of the bad effect which their unilateral action would have upon public opinion in this country. Her Majesty's Government, however, still hope for a settlement of this matter by agreement.

Major Anstruther-Gray: May we take it from my right hon. and learned Friend

that Her Majesty's Government are prepared to stand out strongly for British interests in this matter?

Mr. Lloyd: Her Majesty's Government have made strong representations throughout to the Icelandic Government in defence of British interests.

Colonel Gomme-Duncan: Would not my right hon. and learned Friend agree that possibly the best solution is to get together all the fishing Powers concerned to work out this very thorny problem, which cuts both ways?

Mr. Lloyd: Certainly, I will bear in mind my hon. and gallant Friend's suggestion.

Mr. Edward Evans: Is not this matter related to the whole question of over-fishing? Is it true that the prohibitions placed upon foreign fishermen apply equally to Icelandic fishermen? Will the right hon. and learned Gentleman say whether that statement really represents the facts?

Mr. Lloyd: That is certainly so. In fact, there is another Question on the Order Paper dealing with that matter, which I will answer in due course.

Mr. Stanley: asked the Secretary of State for Foreign Affairs what undertakings Her Majesty's Government have sought from the Icelandic Government with regard to limitation of fishing by Icelandic vessels in the fishing waters which it is now proposed to restrict.

Mr. Selwyn Lloyd: The new Icelandic regulations include a provision specifically applying them to Icelandic trawlers and seine-net fishing boats. Her Majesty's Government recently sought an assurance from the Icelandic Government that this regulation would continue to apply to Icelandic vessels.
The Icelandic reply is contained in an aide mémoire of 12th May, of which a copy was placed in the Library on 19th May. It confirms that the regulation excludes Icelandic vessels from the restricted areas equally with foreign vessels and declares that no change in this arrangement is contemplated. Further, the Icelandic Minister for Foreign Affairs has given an oral assurance that it is intended to treat Icelandic vessels in the same manner as foreign ones.

Oral Answers to Questions — PASSPORTS (LEAFLETS)

Mr. MacColl: asked the Secretary of State for Foreign Affairs how many separate leaflets are issued with each new or renewed passport; what is the total cost of these leaflets in the last convenient year; and how much paper is consumed by them.

Mr. Selwyn Lloyd: During the financial year 1951–52 four leaflets were issued

Title
Quantity
Printing and Paper Cost
Departmental Expenses
Total Cost
Weight of Paper Used




£
s.
d.
£
s.
d.
£
s.
d.
cwt.
qtr.
lb.


1. Notice to Travellers*
300,000
108
6
11
2
14
1
111
1
0
6
1
0


2. Passport and Visa Notes
650,000
614
3
11
15
7
1
629
11
0
54
1
13


3. Travellers Currency Guide
780,000
451
17
4
11
5
11
463
3
3
29
0
27


4. Notice to Passengers
450,000
202
4
8
5
1
1
207
5
9
19
1
19


5. Vaccination and Inoculation (with amendment slips).
500,000 of each
375
2
1
9
7
7
384
9
8
29
0
7


GRAND TOTAL

1,751
14
11
43
15
9
1,795
10
8
138
1
10


* Subsequently combined with Passport and Visa Notes.


The first two leaflets were issued by the Passport Office, the third by the Treasury, the fourth by the Board of Customs and Excise and the fifth by the Ministry of Health.

Mr. MacColl: Does not the right hon. and learned Gentleman think that clearly there is an extravagance here? In particular, does he think it necessary to issue a special leaflet to people living in London who want to go on holiday in France telling them where they can be innoculated against yellow fever in Manchester, if they happen to be in Manchester and want to be innoculated while there against yellow fever? Does he not think that if he cuts down this extravagance it might be possible to reopen the Public Records Office?

Mr. Lloyd: The Government have examined this matter to see if economies can be made in these leaflets. I will certainly bear in mind the point the hon. Member has put forward.

Oral Answers to Questions — EUROPEAN DEFENCE COMMUNITY (BRITISH ASSOCIATION)

Mr. Wyatt: asked the Secretary of State for Foreign Affairs what obstacles there now are to Britain joining the European Defence Community as a participating member.

with every passport issued or renewed. A fifth leaflet was issued during the first part of that period but was later combined with one of the others. The numbers of each leaflet printed during the period, and the cost and the weight of paper consumed are given in a table which I will, with permission, circulate in the OFFICIAL REPORT; the total cost was £1,795 10s. 8d.

The following is the table:

Mr. Selwyn Lloyd: The obstacles remain the same as those which existed when the late Government were dealing with the question.

Mr. Wyatt: In view of the Prime Minister's known anxiety that Britain should join the European Defence Community as soon as possible, and in view of the fact that the Joint Under-Secretary of State for Foreign Affairs said last Wednesday that the only objection remaining was that some of these treaties would have to be re-negotiated with our enemy, does not the right hon. and learned Gentleman agree that the Government must have a more specific attitude than that conveyed in this very vague answer?

Mr. Lloyd: As the hon. Member may know, there have been recently some discussions between the Minister of Defence and the Minister of Defence of the French Government with regard to the association of this country with the European Defence Community. A statement will be made upon those discussions. I think that is the most fruitful way of advance.

Sir T. Moore: Is not the real answer that the reason why Britain cannot become a participating partner in the European Defence Community is that she is already the heart and head of a great Empire and not of Europe?

Mr. Edelman: Will the right hon. and learned Gentleman recall that in 1951 at Strasbourg—and I believe he himself was present—the Prime Minister, when he proposed a European Army, said that Britain would play a full and honourable part in it? Will he explain why Her Majesty's Government have changed their attitude?

Mr. Lloyd: If the hon. Member will read again what the Prime Minister said, he will see that he envisaged a different form of organisation of the European Army from that contained in the E.D.C.

Mr. Bellenger: Has the right hon. and learned Gentleman a statement to make now, or will he make it very soon, as to any further undertakings or guarantees that have been just given by the Foreign Secretary in Germany, as I understand it, in relation to a guarantee with America to France concerning the European Defence Community?

Mr. Lloyd: That is another matter, and if the right hon. Gentleman will put down a Question I will certainly answer it.

Mr. Wyatt: Will the right hon. Gentleman look at the Prime Minister's speech at Strasbourg in August, 1950, because the Prime Minister envisaged exactly the Army now being built up which he then said we should join?

Sir T. Moore: No, co-operate with it.

Oral Answers to Questions — KOREA

Bacteriological Warfare (Allegation)

Mr. Rankin: asked the Secretary of State for foreign Affairs if he will request the United Nations Organisation to appoint a mission of investigation to inquire into, and report upon, the use of bacteria in the Korean war.

Mr. Selwyn Lloyd: No, Sir. The United Nations Command have already offered facilities for an impartial investigation by the International Committee of the Red Cross. The Communists have, however, rejected the offer of any such investigation.

Mr. Rankin: Would not the right hon. and learned Gentleman have another look at this matter? Does he not think that our position should be made very clear indeed to the world? In view of the fact that the United States have used the atomic bomb, that the United Nations are now using the napalm bomb, is there any reason on the face of it to assume that the line would be drawn at infected fleas or powdered toxins?

Mr. Lloyd: Her Majesty's Government are satisfied with the assurances on this matter given by the Government of the United States. So far as investigation is concerned, we do not consider there can be a better body to investigate these charges than the International Committee of the Red Cross. In those circumstances, it seems to me that it should be the Communists who should have another look at the matter.

Mr. Emrys Hughes: Is the Minister aware that in the American magazine "News-Week" there appeared a news item last week that the American Army is asking for an appropriation of 17,197,000 dollars for expanding bateriological warfare research in America? Does he not think that the United Nations should be called upon to investigate why this expansion is necessary?

Mr. Lloyd: I am not responsible for what may appear in American magazines, but research in these matters may very well include protective measures against their possible use by others. If only we could have less obstruction in the Disarmament Commission it might be possible to get on with considering these matters.

British Prisoners (Indoctrination)

Mr. Driberg: asked the Secretary of State for Foreign Affairs if he will continue to seek to establish official communication with British prisoners of war in North Korean hands; what information he has of the extent to which these prisoners have been subjected to any process of re-education or indoctrination, and with what results; how many of those who now accept the Communist view of the Korean War have expressed a wish not to be repatriated; and what is the intention of Her Majesty's Government in regard to the future military service of those who take this view.

Mr. Selwyn Lloyd: Yes, Sir. We shall continue to seek, by every means possible, to establish communications with prisoners of war in North Korean hands, as is provided for in the Geneva Conventions. So far the North Korean and Chinese authorities have refused the appointment of a protecting power, neutral visits to camps, and the regular transmission of prisoner of war mail, all of which are prescribed in the Geneva Conventions.
Thus, our only information on conditions in the camps is what the North Koreans and Chinese themselves choose to pass on to us in the form of selected letters and arranged broadcasts from prisoners of war. The tone of some of these letters and broadcasts suggests that a process of indoctrination is being attempted. Most of them express a keen desire to return home and I am not aware of any British prisoner of war having expressed a wish not be repatriated. The last part of the Question does not therefore arise.

Mr. Driberg: I think there is a slight misunderstanding in the right hon. and learned Gentleman's answer to the last part of my Question. The words "this view" do not apply to repatriation. They apply to "those who now accept the Communist view." From what the Minister has said, is it not evident that there has been some successful indoctrination—as appears from some of the letters he has no doubt seen—and is he aware that this is a problem which will arise when these men are repatriated? Will he say what are the Government's plans for dealing with this situation?

Mr. Lloyd: The hon. Gentleman is quite correct. I did misunderstand the reference in the last part of his Question. I will certainly bear in mind the point which he has just put.

Prisoners (Screening and Repatriation)

Mr. Driberg: asked the Secretary of State for Foreign Affairs if he will inquire of the United Nations Organisation in how many camps North Korean and Chinese prisoners of war are confined; how many of these are on Koje Island; approximately what percentage of the prisoners in each of these camps are deemed to be pro-Communist and anti-Communist; what methods of screening

have been used in order to ascertain the prisoners' views; to what extent they have been subjected to any process of re-education or indoctrination; and how soon he expects to receive the report of the Koje Island inquiry ordered by the United Nations Commander.

Mr. Selwyn Lloyd: Until recently, apart from a hospital compound at Pusan, there was only one United Nations prisoner of war camp. This camp was situated on Koje Island and was divided into a very considerable number of compounds and sub-compounds. Approximately 132,000 prisoners of war and 37,000 civilian internees were confined to this camp. Of this number approximately 20,500 persons were Chinese and the balance Koreans.
In connection with the recent screening of prisoners of war carried out by the United Nations Command and the establishment of greater discipline in the compounds involved in the recent disorders, the United Nations Command is carrying out an extensive regrouping of prisoners as well as a movement from the Koje Island camp of those prisoners who were shown by the screening to be likely to object violently to repatriation.
Until these movements have been completed, it would not be practicable to attempt to give any details of the composition by nationality or Communist sentiment of individual compounds. As regards the re-education of prisoners, I would refer the hon. Gentleman to the reply which I gave to the hon. Member for Woolwich, East (Mr. Mayhew), on 20th May. I expect to receive soon the report ordered by the United Nations Commander on the Koje Island inquiry. but I cannot give an exact date.

Mr. Driberg: Can the right hon. and learned Gentleman say whether it is correct that any Chinese Nationalist officers from Formosa have been used in screening in these camps? Can he also say whether, now that British troops are taking a direct part in the control of the camps, Her Majesty's Government will have a more direct say than hitherto in their control and in this general question of handling prisoners of war?

Mr. Lloyd: In answer to the first part of the supplementary question I can say definitely—according to present information of Her Majesty's Government—that


no Chinese Nationalist interpreters took any part in the main April screening. With regard to the second part of the supplementary question, it is correct that a company of one of Her Majesty's regiments has been ordered to Koje Island camp, and it may be that that will have the result which the hon. Gentleman wishes.

Mr. Beswick: Will the Minister recall the answer he gave to me last week on this point, in which he said that, according to his information, the majority of prisoners in this camp were violently pro-Communist, and when I asked him how he reconciled that answer with the statement made by the Foreign Secretary, he said that what he meant was that there were several camps on Koje Island but it was only in this particular camp that the majority of prisoners were violently pro-Communist? As the right hon. and learned Gentleman now says that there is only one camp on Koje Island, can he reconcile this answer with the one he gave last week?

Mr. Lloyd: The fault was entirely mine, and I apologise. The word I did not use was "compound." There is only one camp, but there are many compounds. I was referring to compounds when I gave my answer.

Mr. Elwyn Jones: Could the right hon. and learned Gentleman answer in detail the part of my hon. Friend's Question which asks what methods of screening have been used and, when he does, will he also answer the question whether Her Majesty's Government are satisfied as to the legality of these screening operations?

Mr. Lloyd: So far as the first part of the hon. Gentleman's supplementary question is concerned, I have nothing to add to the statement made by my right hon. Friend on 7th May, which dealt with that point. With regard to the second part of the supplementary question, I should like to see that on the Order Paper.

Mr. Donnelly: The right hon. and learned Gentleman said that regrouping was taking place. Is not that an open admission of the fact that the previous screening was quite unsatisfactory?

Mr. Lloyd: No, nothing of the sort.

Mr. Wyatt: asked the Secretary of State for Foreign Affairs whether he will recommend to the United Nations that their negotiators in the truce talks in Korea should propose that the Communist authorities, after the signing of an armistice, should have facilities to send missions to the prisoner of war camps with the object of attempting to persuade those of their nationals, who at present refuse repatriation, to return home.

Mr. Selwyn Lloyd: An offer was submitted to the Communists on 28th April by the United Nations Command. This offer was that if they wished, they might verify the results of the screening processes after the armistice was signed. The offer went on to say that the Communists at that time could interview those persons held by the United Nations Command who had indicated that they would violently oppose being returned. If any indicated that they were not still so opposed, the United Nations Command would return them promptly to the Communists. The Communists have not so far accepted this offer.

Mr. Wyatt: I wonder if the right hon. and learned Gentleman would consider adding one more point to that offer, which would make it more like the arrangement made with the Russians at the end of the last war? At that time, their missions were allowed to remain permanently in the area of the camps and, under the supervision of British and American personnel, to interview those people who did not want to go back.

Mr. Lloyd: I think if this suggestion were to be accepted in principle, and an Armistice concluded, there would be no difficulty about making precise arrangements for these missions or for representatives, and I certainly should not rule out the suggestion which the hon. Member made.

Mr. Donnelly: Has the right hon. and learned Gentleman seen the suggestion made in the leading article of "The Times" last Friday, in which it was suggested that a new kind of offer might be made to the Chinese in which they might help to draft some new questions and a re-screening process might take place? What has the right hon. and learned Gentleman to say about that very sensible suggestion put forward in a responsible organ?

Mr. Lloyd: This Question on the Order Paper relates to what should take place after the signing of an armistice.

Mr. Beswick: asked the Secretary of State for Foreign Affairs if he will inquire of the United Nations Organisation what were the nationalities of the impartial commission which screened the Korean prisoners of war on behalf of the United Nations Command; how many were in this commission; how long the task of screening took; and what alternatives were put to those prisoners who did not wish to be repatriated.

Mr. Selwyn Lloyd: Further information has been received on this subject since 7th May when my right hon. Friend made his statement to the House.
Between 4th April, when the meetings on the prisoner of war question were temporarily recessed, and 19th April, when the round figure of 70,000 prisoners willing to be repatriated was given to the Communists, it was possible to screen about two-thirds of the total number of prisoners of war and civilian internees. The figure of 70,000 was inevitably an estimate, since individual screening was not attempted, and could not have been conducted without violence, in certain compounds predominantly occupied by hardened Communists. All prisoners in such compounds were included in the number to be repatriated. I have no information about the exact number of interrogators, but most of them were United States Army personnel. No Chinese Nationalist interpreters were used.
It was made clear to all prisoners interrogated that if they refused repatriation they might have to remain in South Korea long after those who chose repatriation had returned home, and that the United Nations Command could not undertake to send them to any given place after their release from camp.

Mr. Beswick: Does not the Minister now agree that his right hon. Friend the Foreign Secretary was claiming too much for these figures when he put them forward in the House of Commons in the first place; and, in view of the fact that we now know it was neither a full nor a complete investigation, is it not a pity that these important figures were used by the United States authority for propaganda purposes to China; and has that not made it very difficult at the truce

talks to get reasonable negotiations about them?

Mr. Lloyd: I do not agree with the hon. Member at all. So far as the prisoners who refuse to be repatriated are concerned, the screening was done, as my right hon. Friend said, with great care. It was only with regard to those to be repatriated that difficulty arose simply because the interpreters could not enter the compounds.

Mr. E. Fletcher: Were there any British representatives on this commission?

Mr. Lloyd: I am not sure to which commission the hon. Gentleman is referring.

Mr. Fletcher: The screening commission.

Mr. Lloyd: There were no British personnel, so far as I know; but I should like notice of that question.

Mrs. Castle: In view of the unsatisfactory nature of the screening, revealed by the right hon. and learned Gentleman's answer, does he not think it time to reconsider his refusal to send a British observer to Korea?.

Mr. Lloyd: I do not accept the fact that the screening was unsatisfactory. So far as those who wish not to be repatriated are concerned, we are quite satisfied that the screening was properly done. With regard to the 70,000 to be repatriated, it may be that the screening, in that case, was not too satisfactory, but that was solely due to the fact that the control of those particular compounds was in the hands of the Communists.

Several Hon. Members: rose—

Mr. Speaker: This matter is being raised on the Adjournment.

British Observer (Visit)

Mr. Donnelly: asked the Secretary of State for Foreign Affairs if, in view of the deadlock which has been reached in the Korean truce negotiations, he will now arrange with the United Nations Organisation for a member of Her Majesty's Government to visit Korea at once and then report to the House of Commons.

Mr. Selwyn Lloyd: No, Sir.

Mr. Donnelly: Is the right hon. and learned Gentleman aware that there is a growing impression that since the change of Government there has been very much less information given to this House about the Korean war? For example, can the right hon. and learned Gentleman now answer one question which was addressed to him in the Adjournment debate the other night and which was repeated by my hon. Friend the Member for West Ham, South (Mr. Elwyn Jones), about the screening of these prisoners? What did the Foreign Secretary mean by saying in his statement on 7th May, that there would be impartial representatives?

Mr. Lloyd: This supplementary question does not seem to have anything to do with the Question on the Order Paper, which deals with a Minister going to Korea.

Mr. Donnelly: On a point of order. Can I ask your guidance and help, Mr. Speaker? We have continually addressed Questions to the right hon. and learned Gentleman and to the Foreign Secretary about the prisoners in Korea. May I ask you, to safeguard the rights of Private Members of this House, how we can get the right hon. and learned Gentleman to get the information to give to this House without sending a representative out?

Mr. Speaker: I am afraid that that is not a question for me. I understand that the question of the Korean prisoners of war will be debated on the Adjournment.

Mr. Donnelly: In view of the grossly unsatisfactory nature of the reply and the right hon. and learned Gentleman's complacency, I beg to give notice that I shall raise the matter again on the Adjournment.

Mr. Follick: On a point of order. I do not often raise these questions, but I had hoped to ask a rather important question on Question No. 20. Should I be in order in putting the question now?

Mr. Speaker: I am sorry I did not observe the hon. Gentleman rise to ask the question.

Prisoners' Camp Guard (British Forces)

Mr. Edelman: asked the Secretary of State for Foreign Affairs what part British forces will play in guarding prisoners of war in Korea.

Mr. Selwyn Lloyd: One company of the 1st Battalion, King's Shropshire Light Infantry has been sent to Koje Island, on the orders of the United Nations Commander, to take part in guarding the prisoners of war there. Apart from United States and South Korean forces, the troops also engaged in this task now include Canadian, Netherlands and Greek contingents. The part to be played by the various contingents will be determined by the United Nations Command.

Mr. Edelman: As we have responsibility now for guarding these prisoners, should we not also have some share in the responsibility at the truce talks which will be responsible for disposing of the prisoners, and should not our attitude in this matter be, No responsibility without representation?

Mr. Lloyd: So far as the conduct of the truce talks is concerned, we have accepted the same machinery that was provided for that as the late Government accepted, and we see no reason to depart from that at the present time. The Question on the Order Paper relates to the guarding of prisoners of war, and not to the truce talks.

Mr. Langford-Holt: Could my right hon. and learned Friend tell us whether this is going to be a temporary measure or whether British troops are going to be permanently part of the guards?

Mr. Lloyd: I cannot answer that question.

Mr. Beswick: I wonder if the right hon. and learned Gentleman will make this point quite clear, bearing in mind what he said a little earlier? Is the trouble confined to one compound only of this camp? If so, is that the compound to which the British troops are going?

Mr. Lloyd: No, the trouble is not confined to one compound.

Mr. Ede: Will the Government have any say in the orders that are given to the British troops on this island?

Mr. Lloyd: No, the Government have agreed to a United Nations Command being in command of all United Nations forces in Korea. It will follow, therefore, that it will be for the United Nations Command to give orders to the troops under its command.

Mr. Driberg: Although the right hon. and learned Gentleman says that the same arrangements have been adopted as previously, will he not agree that the presence of British troops in the camp is a new factor, and is not the question of the prisoners of war, after all, the most important outstanding problem of the truce talks? Would he, therefore, not reconsider this matter on the lines suggested by my hon. Friend the Member for Coventry, North (Mr. Edelman)?

Mr. Lloyd: When I said that the same arrangements had been adopted I was dealing with the truce talks, not the prisoners of war, and the Question relates to the guarding of prisoners of war.

Mr. Driberg: But the question of the prisoners of war constitutes one of the most important elements in the truce talks.

Mr. Ede: Did the right hon. and learned Gentleman hear the statement on the 1 o'clock news that the Commander on this island had stated that the communist prisoners of war were still in control of the camp? In view of the delicate situation that is apparent, will not the Government take a very active part in seeing what orders are given to British troops engaged in this task?

Mr. Lloyd: There are and there have been discussions between the Government and the United States Government with regard to these matters, but the troops are operationally under the command of the United Nations Command.

Mr. S. Silverman: On a point of order. May I ask your guidance, Mr. Speaker? In view of the statement which has been made that British troops are now going to operate in what obviously is an area of extremely delicate operations under foreign command—the United Nations Command, but a foreign command—who will be responsible in this House for answering Questions about the behaviour or discipline or operations of the British troops there?

Mr. Speaker: I think that that would depend on the Question, but certainly, as the troops are under the United Nations Command, I think Questions with regard to their employment should properly be addressed to the Foreign Secretary.

Mr. Wyatt: Have the Government made known to the American authorities the very grave concern felt in this country among many people at the lapses of discipline which seems to operate in this camp? Will the right hon. and learned Gentleman take an opportunity, now that British troops are going to be there, to insist on much better order and arrangements at this camp?

Mr. Lloyd: The first part of the question really has nothing to do with the Question on the Order Paper.

Mr. Wyatt: What about the second part?

Mr. Edelman: In view of the totally unsatisfactory nature of the answer and the attitude of the Minister of State, I wish to give notice that I shall raise this matter on the Adjournment.

Later—

Mr. Driberg: On a point of order, Mr. Speaker. May I ask your permission to move the Adjournment of the House on a definite matter of urgent public importance, that is, the use of British troops for the guarding of Korean prisoner of war camps, in which Communist prisoners are in control, under conditions which will deprive this House of the right to secure full information about their operations and Her Majesty's Government of full control over them?

Mr. Speaker: The hon. Member asks leave to move the Adjournment of the House on a definite matter of urgent public importance, namely, the use of British troops for the guarding of Korean prisoner of war camps, in which Communist prisoners are in control, under conditions which will deprive this House of the right to secure full information about their operations and Her Majesty's Government of full control over them.

Mr. Driberg: On a point of order, Mr. Speaker. Might I submit, before you give your Ruling, that the question of urgency arises because the troops are, as reported, being moved into these camps at this time.

Mr. Speaker: The use of British troops in Korea is under the command, as I understand it, of the United Nations Command, and their use as guards of prisoners of war does not seem to me to raise any


new point different from their employment in ordinary operations. In those circumstances, I do not think I can rule that this question comes within the Standing Order, because the use of British troops under United Nations Command in Korea for whatever duties they are employed has been a long continuing matter and there is no sudden change in responsibility here that I can see.

Mr. S. Silverman: I only wish to ask how far the limits of such a Ruling would extend. Would this mean—I apologise for being slightly hypothetical—that no matter to what use the United Nations commander in the field chose to put British troops, placed at his disposal under a decision taken nearly two years ago, this House would nevertheless be debarred from discussing the matter as a definite matter of urgent public importance-?

Mr. Speaker: My Ruling certainly does not go as far as that. The employment of troops in a normal way, in the fighting line, on lines of communication or in guarding prisoners of war, is the extent to which my Ruling goes. I do not wish to give any Ruling on hypothetical cases, but on this matter I am perfectly clear.

Koje Island Camp (Inquiry)

Mr. Swingler: asked the Secretary of State for Foreign Affairs who are the British representatives on the commission of inquiry on events on Koje Island.

Mr. Selwyn Lloyd: There are no United Kingdom representatives.

Mr. Swingler: In view of the grave series of events that have occurred on this island, involving the loss of many lives and the demotion of two generals; the fact that British troops are now involved there, that we are not represented at the truce talks, have no representative on the control of the camps and have no representative at this commission of inquiry; what say have we got in these affairs?

Mr. Lloyd: Both parties in this House agreed that the control of operations in Korea should be placed under United Nations Command. That necessarily involves a degree of confidence in that command which our predecessors held and which we certainly hold. So long as soldiers of some 16 countries are under

that command, it is for that command to have responsibility in these matters. However, there are discussions between the Governments about the events that took place there. It is not for us to seek to issue orders to the United Nations Command as to what should be done in these matters.

Mr. Attlee: Would the Minister consider circulating a White Paper on the whole matter in regard to these prisoner of war camps? It does appear to us on this side of the House, and I think to many other people, that these conditions would not have happened if they had been under British control?

Mr. Lloyd: I will certainly consider the suggestion of the right hon. Gentleman.

Oral Answers to Questions — DISPLACED PERSONS (WELFARE)

Captain Ryder: asked the Secretary of State for Foreign Affairs what international authority is now responsible for the welfare of the hard core of displaced persons now remaining; and if he will consider what action can be taken to assist these unfortunate persons.

Mr. Selwyn Lloyd: The interests of these unfortunate people are protected by the United Nations High Commissioner for Refugees. The support of those who are indigent has become the responsibility of the countries where they now reside, whether in Europe or overseas.
The High Commissioner has been authorised by the United Nations General Assembly to appeal for funds for emergency relief, in addition to the money left behind by the International Refugee Organisation for this purpose. The High Commissioner's appeal has only just been received and Her Majesty's Government have not yet decided what action can be taken.

Captain Ryder: Is there any system of international inspection at these displaced persons camps and, if so, is it available for hon. Members to see it?

Mr. Lloyd: I should like to have notice of that question.

Mr. Noel-Baker: Do we understand that the High Commissioner is appealing to Governments, or is it to private charitable organisations?

Mr. Lloyd: That is not quite clear yet. I think he hopes to appeal to both.

Mr. Noel-Baker: Will the Government consider making a contribution, since the work of the High Commissioner must be very largely hampered unless he has adequate funds at his disposal?

Mr. Lloyd: I can assure the right hon. Gentleman that Her Majesty's Government are considering this question very carefully and that they have complete sympathy for this work.

Oral Answers to Questions — MISSING DIPLOMATS

Wing Commander Hulbert: asked the Secretary of State for Foreign Affairs up to what date Mr. Burgess and Mr. Maclean were in receipt of the pay and allowances attaching to their appointment.

Mr. Selwyn Lloyd: Mr. Maclean and Mr. Burgess were in receipt of pay and allowances to 31st May, 1951.

Oral Answers to Questions — NINE POWER TREATY

Mr. A. Henderson: asked the Secretary of State for Foreign Affairs whether it is the view of Her Majesty's Government that the provisions of the Nine Power Treaty are still operative.

Mr. Selwyn Lloyd: This is a complicated legal matter on which, I regret, I cannot yet give a full answer. As far as Her Majesty's Government are concerned, however, they still adhere to the principles of the Treaty in so far as they are applicable to present conditions.

Mr. Henderson: Would the right hon. and learned Gentleman give an assurance that the existence of this Treaty will not be allowed to prejudice the utmost development of trade by direct agreement with Chinese Government agencies? Has a reply been received from the Chinese Government with regard to the trade offers that emanated from the Moscow Conference?

Mr. Lloyd: As far as the second part of the supplementary question is concerned, the answer is "No." With regard to the first part, my impression is in accordance with the suggestion of the right hon. and learned Gentleman, but I would prefer to examine the matter

further. I propose to send the right hon. and learned Gentleman a letter, explaining rather more fully the present legal position.

Mr. Henderson: I was not so much concerned with the difficulties from the Chinese end; but there are other signatories to this Treaty, and I was asking whether, in view of the fact that other nations were signatories to that Treaty, the right hon. and learned Gentleman will now allow the British to develop trade with the Chinese Government?

Mr. Lloyd: Perhaps the right hon. and learned Gentleman will await my letter to him.

Mr. Elwyn Jones: Could the right hon. and learned Gentleman say what is this Nine Power Treaty and which are the nine Powers?

Mr. Lloyd: It is a Treaty between the United States of America, Belgium, the British Empire, China, France, Italy, Japan, the Netherlands and Portugal, and it was signed on 6th February, 1922.

Oral Answers to Questions — BRITISH FIRMS, CHINA

Mr. Wyatt: asked the Secretary of State for Foreign Affairs whether be will make a statement on the difficulties now being experienced by British business firms in China; and what action he proposes.

Mr. Selwyn Lloyd: I would refer the hon. Gentleman to my right hon. Friend's statement in the House on 20th May.

Mr. Wyatt: May I ask two questions? Has there been any reaction so far from the Chinese Government to the new arrangements? Secondly, have Her Majesty's Government yet had any reply about their inquiries following the Moscow Conference?

Mr. Lloyd: The answer to both questions is, "No. Sir."

Mr. S. Silverman: Will the right hon. and learned Gentleman in the first place bear in mind that if he would like any information, in addition to the information already supplied, about anything which took place in the Moscow Conference, it is readily at his disposal in this country; and, in the second place, will he bear in mind that until the Japanese


forced us out of the Chinese market by unfair trading methods, China afforded one of the most valuable of Lancashire's export markets? Will he assure the House that the Government will do nothing to put any obstacle in the way of any persons in either country cooperating to reconstruct that trade?

Mr. Lloyd: Her Majesty's Government are well aware of the value that there would be of trade in certain commodities between this country and China, and certainly we should include within that category the products of Lancashire. As far as the first part of the question is concerned, if anything is to come of this business it seems that the Chinese Government should make some reply to representations which we made on 28th April. I hope that they will do so.

Oral Answers to Questions — TRIESTE (ZONE A ADMINISTRATION)

Sir D. Savory: asked the Secretary of State for Foreign Affairs whether, in drafting his reply to the protest of Marshal Tito against the proposed changes in the administration of Zone A of the Free Territory of Trieste, he will call the attention of the Marshal to the situation existing in Zone B since the United States of America and Britain share with Yugoslavia responsibility to the United Nations Security Council for the administration of the Free Territory of Trieste; and whether, in view of the continued oppression of the Italian population in Zone B, he will also call the attention of Marshal Tito to Annex VI, Article 2 (a), of the Treaty of Peace with Italy, in accordance with which the Security Council of the United Nations has undertaken to ensure the protection of the basic human rights of the inhabitants.

Mr. Selwyn Lloyd: I have nothing to add to the answer given to my hon. Friend on 19th May. As I then said, all relevant considerations will be borne in mind in the preparation of the reply.

Sir D. Savory: Will my right hon. and learned Friend not point out that over 6,000 persecuted refugees—Italians—have had to take refuge from Zone B into Zone A and that, as a result of the so-called trial of Capo d'Istria, there has been almost a complete exodus of

teachers from Zone B? Will the right hon. and learned Gentleman not appreciate that Marshal Tito is only there as a trustee and that we are equally responsible to the United Nations for what goes on in Zone B?

Mr. Lloyd: I can only repeat the answer which I have given to my hon. Friend—that this matter is being carefully considered and that it would not be useful to disclose to the House at the moment the nature of the reply which Her Majesty's Government propose to deliver in due course.

Mr. Dalton: Despite the accusations and counter-accusations about these zones, are the Government doing their best to carry the Yugoslav Government, no less than the Italian Government, with them in any changes it is proposed to make here?

Mr. Dodds: They are the allies, not the enemies.

Mr. Lloyd: Steps have been taken by Her Majesty's Government to keep the Yugoslav Government informed of what is taking place and an endeavour has been made to point out to them as clearly as possible the implications of the cent Memorandum of Understanding. As has been said before, the purpose of Her Majesty's Government, which I am certain will be shared by all hon. Members in all parts of the House, is to see that nothing is done to prevent a settlement being reached successfully by direct conversations between the Italians and the Yugoslays themselves.

Mr. Ernest Davies: In view of the joint responsibility of Britain, the United States and Yugoslavia for these two zones, is there any machinery for consultations between the three Powers? If not, would it not be advisable to set up some permanent machinery so that there can be a constant interchange of views upon this matter?

Mr. Lloyd: That is a different question from the one on the Order Paper.

Oral Answers to Questions — GERMANY

Woman's Arrest, Berlin

Sir D. Savory: asked the Secretary of State for Foreign Affairs whether he is aware that Mrs. Frieda Dalin was seized


by the Russian guard during the weekend while she was waiting for her husband outside the Soviet War Memorial in the Charlottenburger Chaussee, which is in the British Sector of Berlin, and carried off in a motor car to the Russian sector; and what reply has been received to the protest made by Major-General Coleman, the British Commandant, to the Representative in Berlin of the Soviet Control Commission.

Mr. Selwyn Lloyd: I am aware of this incident. No reply has so far been received from the Soviet Commander to General Coleman's protest.

Sir D. Savory: In view of the innumerable incidents which have taken place, will my right hon. and learned Friend consider whether in future this Soviet monument, which is in the British sector, should be guarded by British authorities so that these incidents can be avoided? Further, in view of these outrages, why should we allow a broadcasting station for Russia still to exist in the British sector?

Mr. Lloyd: The second supplementary is something quite different from the Question on the Order Paper. As far as the first matter which my hon. Friend raised is concerned, it is important, I think, not to over-emphasise these incidents. Obviously and unfortunately there are reasons for untoward events happening, because the memorial is in the British sector but is guarded by Soviet guards, which obviously makes things awkward in certain circumstances. On the other hand, I do not see that I could accept the suggestion that we should put forward the idea of replacing the guards on a Soviet memorial by British soldiers. We are, however, awaiting the reply from the Soviet Commander. If that is unsatisfactory, then I think I can assure my hon. Friend that we shall see what steps can be taken to prevent such incidents from happening in the future.

Contractual Agreements

Mr. Donnelly: asked the Secretary of State for Foreign Affairs whether he can yet make a further statement on the contractual arrangements being negotiated with the Federal Government of West Germany.

Mr. Selwyn Lloyd: The contractual agreements with the German Federal

Republic were signed in Bonn today. A short Command Paper has already been placed before the House. This will be followed by a further Command Paper giving the complete text of all the agreements as soon as copies of the documents actually signed can be printed.

Mr. Donnelly: Pending the opportunity of studying this Command Paper in detail, may I ask whether the right bon. and learned Gentleman is aware that there is a very substantial body of opinion in this country which thinks that Her Majesty's Government have acted far too precipitately in this matter? Is the right hon. and learned Gentleman aware that if their action prejudices the unification of Germany in the future, their responsibility in history will be grave and great?

Mr. Lloyd: That seems to me to be a matter for debate, and I entirely disagree with what the hon. Gentleman said.

Mr. Dalton: In the course of the White Paper, shall we have a statement about some additional military guarantee which is stated to have been given by us against the contingency of Germany withdrawing from the E.D.C.?

Mr. Lloyd: I think that is a matter which would more appropriately arise in connection with the E.D.C. Treaty.

Oral Answers to Questions — ARRESTED BRITISH SUBJECTS, BUENOS AIRES

Sir D. Savory: asked the Secretary of State for Foreign Affairs whether he is aware that four British subjects were arrested at Buenos Aires on 15th May and are now in the Devoto Prison in that city; and whether he will protest against the arrest and imprisonment of these British subjects without any charge having been brought against them.

Mr. Selwyn Lloyd: Yes, Sir. Four British subjects, Messrs. Bowen, Howe, Knox and Nordaby, were arrested on 15th May and accused of contravening the Argentine Anti-Trust Laws. Her Majesty's Ambassador intervened and on 23rd May all except Knox were freed. The Ambassador is continuing his efforts to secure the release of Knox and certain other British subjects who are also involved.

Sir D. Savory: Will my right hon. and learned Friend not insist that Her Majesty's Ambassador demands compensation for these gentlemen who have been thrown into prison without any charge being made against them and simply in order that they might act as witnesses? In what civilised country are witnesses kept in prison until they give evidence?

Mr. Lloyd: The Argentine procedure provides for taking accused persons into custody for a reasonable period for questioning. After questioning, they must be either formally indicted or immediately released. Persons detained in that way may not be granted bail until after questioning. They may be released on bail as soon as they have been formally charged.

Oral Answers to Questions — ANGLO-CHINESE TRADE

Mr. Donnelly: asked the Secretary of State for Foreign Affairs what steps he has taken to ascertain if the Chinese Government would receive a trade mission similar to that led by Sir Leslie Boyce in 1946 in order to discuss the possibilities of any future trading arrangements and to deal with outstanding problems of liquidation of assets.

MR. Selwyn Lloyd: A Note was presented on 18th April to the Central People's Government of China saying that Her Majesty's Government would welcome any Chinese proposals to increase China's trade with the United Kingdom. No reply has been received to this Note. I would also refer the hon. Gentleman to the statement in the House on 20th May in which my right hon. Friend said that a suggestion by the British firms operations in China that they should set up a form of trade organization was conveyed officially to the Central People's Government.
The Chinese Government are therefore well aware of Her Majesty's Government's desire to increase Anglo-Chinese trade, but it would seem inappropriate to go into further details until the Chinese Government give some indication of their own views on this question.
The problem of the liquidation of their assets is one for the British firms in China to consider. It would riot, however, seem that a trade mission similar to that led by

Sir Leslie Boyce in 1946 would be a competent body to discuss such questions.

Mr. Donnelly: In view of the very moderate tone adopted by the Foreign Secretary on 20th May and the answer which the right hon. and learned Gentleman has just given, may I stress this point? Will he at least consult members of the Boyce Mission to China to see what they think about such a proposal at the present moment?

Mr. F. Maclean: Has Her Majestys Government ever received any reply to any Notes which they have addressed to the Chinese People's Government?

Mr. Lloyd: That is a question which I should like to see on the Order Paper.

Oral Answers to Questions — TERRITORIAL WATERS (LIMIT)

Mr. Hoy: asked the Secretary of State for Foreign Affairs whether, in view of the decision of The Hague Court in the Anglo-Norwegian fisheries dispute, Her Majesty's Government are prepared to extend the limit of British territorial waters from three to four miles.

Mr. Selwyn Lloyd: No, Sir. The decision of The Hague Court related not to the breadth of territorial waters but to the method of delimiting the base line from which territorial waters are measured. In the opinion of Her Majesty's Government the Court's judgment does not in any way affect the position that it is contrary to international law for a State to claim a territorial belt of more than three miles unless very special historical circumstances can be invoked. In the Anglo-Norwegian fisheries case, Her Majesty's Government admitted that Norway was entitled to a belt four miles in width precisely because of special historical circumstances. Norway has a limit of four miles which goes back in time to a period earlier than the adoption of three miles by any country.

Mr. Hoy: While agreeing with the Minister of State that this matter is not likely to be settled satisfactorily by unilateral action, may I ask him whether the Foreign Secretary will consider convening a conference urgently of the signatories to the Fishing Convention to consider this matter?

Mr. Lloyd: That is a suggestion I will certainly bear in mind.

Mr. Duthie: asked the Secretary of State for Foreign Affairs, in view of the decision of The Hague Court in the Anglo-Norwegian fisheries dispute, what is the policy of Her Majesty's Government with regard to the adoption of the base line principle for British territorial waters and to which headlands it would apply.

Mr. Selwyn Lloyd: The future policy of Her Majesty's Government with regard to the method of delimitation of British territorial waters has not yet been settled, but it is being studied in the light of the judgment of The Hague Court in the Anglo-Norwegian fisheries dispute. In these circumstances, it is not possible to say which headlands would become base points if it were decided to adopt the principles enunciated by the Court.
As a naval and maritime Power with considerable deep sea fishing interests; the United Kingdom cannot, without careful consideration, depart from its established policy of maintaining a maximum area of the seas free from national jurisdiction. Her Majesty's Government are in any case bound by certain fisheries conventions to retain the present exclusive fishery limits, so far as the vessels of certain countries are concerned, and have the further obligation to consult Colonial Governments who would be affected by any change in policy.
While Her Majesty's Government are fully alive to the advantages which might accrue to inshore fishermen from the adoption of the base-line principle, they feel that it would not be right to come to firm conclusions with regard to a very serious action until the wider aspects of the problem have been fully examined.

Mr. Duthie: While appreciating the difficulties that beset this problem, may I ask my right hon. and learned Friend if he will bear in mind the grim paradox that no British trawler can operate in the Moray Firth inside a line drawn between Duncansby Head and Rattray Head, whereas foreign trawlers have been coming in during the last 50 years and have done much to destroy the livelihood of the largely indigenous fishing population along that coast?

Mr. Lloyd: I am quite aware of the point my hon. Friend has put forward

and I have considerable sympathy, but the fact is that in the areas outside territorial waters foreign trawlers cannot be excluded, but they are not permitted to land in the United Kingdom any fish they catch in those waters.

Lieut.-Colonel Elliot: Will my right hon. and learned Friend bear in mind that our people along our northern coasts feel that this principle seems always to operate against us, and never in our favour?

Mr. Edward Evans: Will the Minister have this matter referred to the White Fish Authority for an adequate report?

Mr. Lloyd: I consider that the proper course to pursue is to continue our negotiations with the Icelandic Government on this matter and to bear in mind the suggestion which the hon. Member for Leith (Mr. Hoy) and the hon. Member for Banff (Mr. Duthie) have put forward.

Oral Answers to Questions — PERSIA (AMERICAN ARMS ASSISTANCE)

Mr. Shinwell: asked the Secretary of State for Foreign Affairs if he is aware that the United States of America have promised arms assistance to Iran; and if, in view of the effect this will have on Middle East defence in general and our conversations with Egypt in particular, he will state the extent to which Her Majesty's Government participated in the negotiations prior to the grant of this assistance.

Mr. Selwyn Lloyd: The United States Government have given military assistance to Persia since 1948. I understand that United States legislation required the Persian Government to give certain assurances at the beginning of 1952 and that as these assurances had not been given by the 8th January, military assistance was suspended on that date. After an exchange of notes between the Persian Government and the United States Government on 24th April, the assistance was resumed. Her Majesty's Government did not participate in the negotiations on this subject.

Mr. Shinwell: Is it not strange that the United States, having suspended arms assistance to Persia, should resume arms assistance to this country with whom we


are in dispute, without having consulted Her Majesty's Government at all? May I ask the right hon. and learned Gentleman whether representations had been made to the United States Government upon this matter; and whether there is any prospect of our being consulted before this promise materialises?

Mr. Lloyd: The question as to whether or not the United States Government should give assistance to Persia is entirely a matter for that Government and not a matter for which Her Majesty's Government have any responsibility. However, this is a matter upon which there have been discussions between Her Majesty's Government and the United States Government.

Mr. Shinwell: Is it not an unusual and strange doctrine that the United States with whom we are in friendly relations should render arms assistance to a country with whom we are in unfriendly relations without Her Majesty's Government being consulted at all? Are we to be completely ignored by the United States in such matters?

Mr. Lloyd: The United States Government were continuing a course of conduct which they have pursued since 1948.

Mr. Shinwell: I am sorry to persist, but can we have an assurance from the right hon. and learned Gentleman on behalf of Her Majesty's Government that before the United States actually send arms to Persia, we shall have an opportunity of making representations?

Mr. Lloyd: That is another question. If the right hon. Gentleman will put it on the Order Paper, I will consider it.

Mr. Godfrey Nicholson: What are the nature and dimensions of this assistance?

Mr. Lloyd: I should require notice of that question.

Oral Answers to Questions — PASSPORTS (CHILDREN)

Mr. Sorensen: asked the Secretary of State for Foreign Affairs if he will clarify the position of applicants for passports who are under age, to ensure the acceptance of the mother's responsibility and permission where she has been divorced, or is living apart from her child's father but the child or young person is living with her.

Mr. Selwyn Lloyd: The general rule is that a passport may be granted to a child with the consent of the legal guardian, who, under English law and in normal circumstances, is the father. If the parents are separated or divorced and the legal custody of the child has been transferred by order of the court to the mother, the rights, as well as the duties of guardianship devolve upon the mother, subject to any conditions mentioned in the order, so long as the order of the court remains operative. Passport facilities would be granted in such a case with the consent of the mother, due regard being had, however, to any rights, such as the right of access to the child, which may have been reserved to the father by the court order.

Mr. Sorensen: What happens if there has not been this legal transference and the child is staying with the mother while the father is elsewhere and his acceptance is not easy to secure?

Mr. Lloyd: In such a case there is a certain discretion which can be exercised about the issue of passports.

Lieut.-Colonel Lipton: Is the right hon. and learned Gentleman aware that passports are often issued without any inquiry of the kind he has indicated, and that once a passport is issued no further inquiries are made either by the Foreign Office or by the Home Office before the child is taken from the country either by a relative or by some person who is not in any way, related to the child?

Orders of the Day — FINANCE BILL

Considered in Committee [Progress. 22nd May].

[Colonel Sir CHARLES MACANDREW in the Chair]

Clause 41.—(EFFECT OF TRANSFERS OF GOING CONCERNS ON STANDARD PROFITS AND COMPUTATION OF PROFITS AND LOSSES.)

Question again proposed, "That the Clause, as amended, stand part of the Bill."

3.34 p.m.

Mr. James Callaghan: We were at the point, when we concluded our last sitting on the Bill, at which the Chancellor of the Exchequer had promised to look into the question of transfer of businesses from nationalised undertakings into private hands and how far this could be amalgamated into Clause 41. He said he would make a statement at a later date. I should be glad to hear from the Financial Secretary whether the Chancellor has been able to give this any consideration and at what stage he will be making a statement.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): My right hon. Friend has not yet had time to consider the matter. He hopes to do so at a later stage.

Mr. Hugh Gaitskell: May we take it that on Clause 49, where, I imagine, there would be a further opportunity of discussing the position of nationalised boards, possibly on the Motion that the Clause stand part of the Bill, the Chancellor of the Exchequer may be able to make a statement on this matter?

Mr. Boyd-Carpenter: I do not know whether it will be by that stage, but, as the right hon. Gentleman says, the position of nationalised boards generally arises under that Clause.

Question put, and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 42.—(SPECIAL PROVISIONS AS TO TRANSFERS OF TRADES OR BUSI NESSES TO NEWLY CREATED BODIES CORPORATE WITHOUT CHANGE OF ULTIMATE CONTROL.)

Amendment made, in page 49, line 6, leave out, "July, nineteen hundred and forty-eight," and insert:

"January, nineteen hundred and fortynine."—[Mr. Boyd-Carpenter.]

Clause, as amended, ordered to stand part of the Bill.

Clauses 43 and 44 ordered to stand part of the Bill.

Clause 45.—(BODIES CORPORATE NOT ORDINARILY RESIDENT IN THE UNITED KINGDOM.)

Mr. Boyd-Carpenter: I beg to move, in page 50, line 8, at the end, to insert:
(b) the amount by which the value of the assets of the body corporate exceeds the amount of its liabilities; or
This is consequential on my right hon. Friend's statement on Clause 33 on the alternative standard.

Amendment agreed to.

Motion made, and Question proposed. "That the Clause, as amended, stand part of the Bill."

Mr. G. R. Mitchison: I should like to make one or two inquiries on this Clause. Subsection (1) refers to apportionment of the trade or business of a body corporate as between the trade or business carried on within the United Kingdom and the part carried on outside. I should like to know on what sort of basis that apportionment will be made. It is obviously a matter of very great importance.
The kind of thing I have in mind is that we might have, for instance, a commercial company effecting purchases and sales with a headquarters outside the United Kingdom and a branch or a representation of some sort within the United Kingdom. What is the footing upon which the headquarters' expenses—overhead expenses, as they are often called—of that company are to be apportioned? I have no doubt that there is some practice in the matter.
Again, there will be cases of foreign banks trading in this country. I should have thought that it would have been advisable to have it made known as soon as possible what the Chancellor has in


mind by way of apportionment in that type of case. There are many others. For instance, there is the case of a shipping company. I can imagine the same sort of point arising there.
The next point is that these apportionments are subject to what appears to be a discretionary right to give directions. This rests with the Commissioners as they are called, in the first place, or, on appeal, with the Special Commissioners. That discretionary right to give directions is contingent on there being special circumstances and is dealt with in line 24, page 50. I should like to know what kind of special circumstances are supposed to exist which will lead to a direction of that sort.
The phrase is completely vague so far as I can see. I would suggest that it is too sweeping, and there ought to be introduced, at some stage or another, some kind of definition or indication as to what sort of special circumstances they are or can be. One can have all kinds of cases where it might be said that this, that, or the other was a concatenation of things constituting special circumstances. As the Clause is drafted, it appears to be left to the Commissioners themselves not only to make a direction, but, as a preliminary matter, to consider whether there are or are not special circumstances.
I should next like to ask this question. I have great respect for the trouble that the Commissioners always take in dealing with these matters and for their experience in them, but they are very different bodies and operate in different parts of the country. One of the factors in their choice is that they have local knowledge, and are not the type of body of which one would expect that such general responsibilities as this Clause suggests would be imposed on them.
I agree that is recognised to some extent by an appeal to the Special Commissioners, but the Chancellor will have it in mind that this is a discretionary power to direct coupled with a power to decide what are or are not special circumstances. If that is so, then the burden is particularly heavy, in the first instance, on the Commissioners and, on appeal, on the Special Commissioners, because I imagine that in a case of that sort the courts would be exceedingly slow to interfere with the exercise of the Commissioners' discretion. In short, a very complicated question

appears to be left with remarkably little guidance as to what are special circumstances and also, in my opinion, as to the basis of apportionment.
3.45 p.m.
There is another point I want to ask about. In page 51, lines 7 to 9, we come to a person who comes to be taken as an agent because he acts regularly as a broker for a body corporate, and a broker includes a general commission agent. I suppose that this Clause is intended to refer to cases where there are dealings in more or less established markets, and established brokers may in the ordinary course of business habitually act for a foreign company. Surely it is not intended to include them as agents. If that is all that is intended, I wonder if it is really necessary to make this provision, because they then appear to be brokers acting in one deal after another, and that could hardly constitute them agents.
I suppose that the way in which they are paid has much to do with it. There are brokers, I believe, who act for both parties and the terms of remuneration differ a good deal according to the customs of the markets. I understand that kind of case, but is there any more in it than that, because if that is all that is meant then I fail to see the purpose of putting in the provision? If something more is intended I should very much like to know about it.
Those are the main questions I wanted to ask, and I ask them not only with a view to finding out what is in the Chancellor's mind in these matters, but also by way of suggesting to him that the Clause as drawn is not too clear; and particularly on the earlier points about special circumstances—the directions which may be given and the basis of apportionment. I think that the discretion in the hands of the Commissioners is too wide.

Mr. Charles Fletcher-Cooke: I want to put a question to the Chancellor. Do the profits that are brought into charge by this Clause include in their computation any amount of Excess Profits Levy that these foreign companies may have to pay in their countries? I know that there has been great mitigation on this question of double taxation, but I am under the impression that that has


been related largely to Income Tax and not to the Profits Tax or to the Excess Profits Levy.
In another place, in a recent case, a decision was come to under the Finance Act, 1940, which surprised everybody very much. It concerned a large amount of Excess Profits Levy imposed in the Republic of Eire, and it was not considered deductable as expenses for the purpose of computating the Excess Profits Levy in this country. What is most significant about that decision is that in their speeches their Lordships said quite clearly that it looked as though Parliament, when passing the Finance Act (No. 2) 1939 and the Finance Act, 1940, created the impression that these foreign excess profits levies were, in fact, deductable expenses; that there had been some sort of an assurance by the then Chancellor of the Exchequer that was so; but in the event it has proved to be wrong.
If we are to encourage foreign companies to trade with this country—and that must be the desire of all of us—as far as possible we should see that their income is not subjected twice to these very high levies of taxation. I hope it will be possible, if not now at a later stage, to see whether, when Excess Profits Levy has already been paid in the country of origin, these companies will not again have to pay here, too.

Mr. Boyd-Carpenter: The hon. and learned Member for Kettering (Mr. Mitchison) asked, in substance, three questions. The first was as to the basis of apportionment. The best way I can answer that is by referring him to the lines which immediately follow those which he quoted, from line 26, on page 50. They read that the Commissioners shall apply
the proportion which the profits of the trade or business to which this Part of this Act applies bears to the total profits of the body corporate.
The attempt is made in making these computations to treat them as being relative to the figures applied to the whole transactions of the overseas company.
Then the hon. and learned Gentleman asked me what we contemplated by "special circumstances." He will appreciate that it is not possible to give a comprehensive definition. It is of the essence of

such a provision that there should be a little flexibility. The kind of thing is this: a state of affairs in which a very large proportion of the assets concerned was located in the United Kingdom; or in which all the profits made in the United Kingdom were remitted overseas. Those are types of special circumstance, but it is necessary to have a degree of flexibility.
Then he asked a third question about the position of a broker acting as an agent for a body corporate. What is desired is to make it quite certain that the ordinary professional broker acting from time to time on behalf of an overseas company shall not be treated as an agent for this purpose. It may be that the hon. and learned Gentleman is right that the difficulty might not arise in any event, but it is probably safer to make quite sure that people carrying on their ordinary profession do not find themselves mulcted in having to pay somebody else's tax.
My hon. Friend the Member for Darwen (Mr. Fletcher-Cooke) raised a rather specialised point in regard to the excess profits taxes levied in other countries. The general answer to him must be based on the general proposition as to the proportion which I mentioned a moment ago. It is intended that under Clause 60, which deals with credit for foreign taxes, allowance shall be made for such taxes when paid. The Irish case is very much in our minds.

Mr. Eric Fletcher: I do not think we can agree that the Financial Secretary has answered the questions put to him. Will he be good enough to look again at the first part of Clause 45? My hon. and learned Friend the Member for Kettering (Mr. Mitchison) asked how this apportionment is to be made. If the Financial Secretary will look at the Clause he will see that it is only with regard to apportionments mentioned in subsection (1, d) that the Commissioners have to make the apportionments, by applying the proportion which the profits of the trade or business bear to the total profits made by the body corporate. On that we are all agreed.
In addition to that, we observe that apportionments have to be made of the paid-up share capital, sums received in cash and sums paid by way of repayment of share capital. All those have to be apportioned under the Clause and construed as references to such part as may


be properly apportionable of the trade or business of the body corporate carried on in the United Kingdom.
On what principle are they to be apportioned? Presumably on a principle different from the principle which is to apply to the apportionment mentioned in paragraph (d). I imagine that if the apportionments of (a) (b) and (c) were to be made on the same principle, Clause 45 would have been differently framed and the Commissioners would have been directed to apply the same mathematical tests for all purposes. I hope that the Solicitor-General will agree with me that with regard to apportionments under (a) (b) and (c) the method laid down for the apportionment under paragraph (d) must be excluded. I take it he would agree that that is the correct legal interpretation of Clause 45 (1).
If I am right in that, it follows that some other and quite different basis must be adopted for the apportionments under (a) (b) and (c). The Committee are entitled to know what that other basis is. As matters stand, they are very unsatisfactory. We are dealing with companies not resident in the United Kingdom, some part of whose business is carried on in this country. It may be a small part, a half, or a very large part. Under the Clause, the companies are made liable to Excess Profits Levy. Somebody has to do a complicated sum. We are told the basis under which that is to be done in paragraph (d) but not in paragraphs (a) (b) and (c). I hope that the Solicitor-General or the Financial Secretary will give us a clear answer before we pass on.
I have one other question to ask on the Clause which I think is material, and which I think the Solicitor-General will agree will call for Amendment before the Report stage. It will be seen that subsections (3) and (4) are designed to enable the Revenue to assess Excess Profits Levy, not on the company but on the agent who happens to be resident in the United Kingdom. Subsection (4) says:
Any person who has been charged under subsection (2) of this section in respect of any body corporate not ordinarily resident in the United Kingdom may retain, out of money coining into his hands on behalf of that body corporate, so much thereof from time to time as is sufficient to pay the tax charged, and shall be indemnified for all such payments made in pursuance of that subsection.

By the time mentioned, it may be too late. I hope that the Financial Secretary will deal with this point.
Do those words mean that the person who is liable to be charged may retain sufficient? Why are the opening words of paragraph (4) limited to "any person who has been charged"? In practice, if any person finds himself in the position of agent for a company resident overseas in circumstances in which the agent is liable to pay Excess Profits Levy, he will probably want of his own accord and for his own benefit to retain in his own hands sufficient of the company's money to satisfy any subsequent charge against him for Excess Profits Levy. The last subsection is not good enough for his protection because it proposes to wait until after he has been charged.
Surely it is necessary for such a person to be able to retain whatever funds he may think necessary to meet Excess Profits Levy which will be against the company and which will be a charge levied in his name. I hope that the provisions of the Clause will be made abundantly clear, so that a person in that position does not have to wait until there is an assessment against him before he can retain sufficient to meet the levy, but may be able to hold it against the contingency that he will become personally liable for the Excess Profits Levy on the company.

4.0 p.m.

Mr. Boyd-Carpenter: In reply to the point raised by the hon. Gentleman the Member for Islington, East (Mr. E. Fletcher), we will look again at the drafting. The general intention is perfectly clear, as I explained to the Committee a few moments ago, namely, that the various computations shall be made so as to preserve the proportion between the figures relevant to the transactions of the United Kingdom branch of the Corporation as a whole. I agree that on the drafting it looks as if there may be something in what the hon. Gentleman says as to an apparent differentiation, but that is not the intention.
The second point raised by the hon. Gentleman was the position of the agent who, as he said, is not entitled to retain the money until he has been charged with the tax. One appreciates that difficulties may arise, but it would be a serious thing to give to the agent a general lien to retain moneys when no tax had been


levied upon them. In practice, it might well be the case that, if he is charged in respect of one lot, he can retain the next series of payments. We have noted the point and perhaps it will be possible to devise some means of meeting it without going, as I think the hon. Gentleman tended to go, too far in the opposite direction.

Question put, and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 46 ordered to stand part of the Bill.

Clause 47.—(MINES AND OIL WELLS.)

Mr. F. J. Erroll: I beg to move, in page 51, line 30, to leave out "of metal."
This small Amendment is designed to draw attention to the fact that the concessions in regard to the mining industry are to be given only to those concerns which mine metal and those which procure oil from below the surface of the earth. It seems rather unreasonable that these concessions, valuable as they are, should be confined to metal mines and not be extended to non-metalliferous mining. I want to stress the importance of industrial diamonds to the rearmament industry, and, therefore, the need for them to receive comparable benefit and relief.
Earlier speakers have referred to the importance of the china clay industry, to which no comparable relief is being given. There are other important nonmetal mining activities such as mica mining, salt mining, sulphur mining. I submit that if the case is made for metal mining, it is equally good for the mining of non-metals. I hope, therefore, that my right hon. Friend will accept our amendment and thus give this relief to all those firms and people engaged in the hazardous occupation of mining.

Mr. Anthony Crosland: This Amendment raises an important point because the concessions which the Chancellor made last week applied to oil companies, mining companies and asbestos companies, whereas this Clause is much more restricted. I have some sympathy with the hon. Member for Altrincham and Sale (Mr. Erroll), who said that it cannot be

argued that the materials he mentioned are less important than the ones mentioned in the Clause. The Clause is drawn rather narrowly and, if we make concessions of this kind, the logic is to make them widely. I hope, therefore, that we shall have a sympathetic answer from the Government.

Mr. Gaitskell: I wish briefly to support the hon. Member for Altrincham and Sale (Mr. Erroll) and my hon. Friend the Member for Gloucestershire, South (Mr. Crosland). If we are to make concessions to mineral companies there seems to be no point in drawing a distinction between metals and other mineral products. I do not know for certain, but I imagine that, for example, anhydrite is not a metal; nevertheless, it is an extremely important product which we hope will prove to be the basis of the production of a large amount of sulphuric acid in this country, and so replace imported supplies of sulphur.
Therefore, it would be absurd to exclude companies mining anhydrite from the benefits of this concession. I do not propose to prolong the proceedings, but we shall need a good deal of convincing from the Solicitor-General before he rejects this Amendment and refuses to do anything about the matter.

Mr. Charles Williams: Because I have a rather closer connection with this matter than some people, may I ask the Chancellor once again seriously to consider the position of the china clay industry? It is true that it is comparatively prosperous, but it is of immense value to the export trade. Apart from the mineral mentioned by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), there are many other substances such as gypsum, pitchblend, etc.
I could give the Committee a long list with a large number of arguments, but I will not do so. It is obvious that the Treasury have not considered this matter and I hope the Government will include these other materials and make the Clause much more simple.

The Solicitor-General (Sir Reginald Manningham-Buller): I can do no more than repeat to my right hon. Friend the Member for Torquay (Mr. C. Williams) what I have said already about the china clay industry, namely, that it is under consideration.
We agree with the general principle raised by my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) and by the right hon. Gentleman and hon. Gentleman opposite. The intention of this Clause is similar to that behind the 1940 Finance Act. The right hon. Gentleman will remember that there power was given to the board of referees to give extra percentage allowances, like those proposed in the new Clause, to concerns engaged on working minerals from a natural source of a wasting nature. That power was quite general but, in fact, apart from a small percentage in relation to coal, the only cases in which the board of referees granted these additional percentages were those of metal mines and oil wells. This Clause has been limited to metal mines and oil wells to obviate going back to the board of referees.
The Committee will appreciate that instead of it being left to the discretion of the board of referees to fix a varying percentage for different industries, the percentages here are fixed, and to that extent this Clause operates as a clarifying medium and is more simple in scope than the Finance Act, 1940. We will give consideration to the case of industrial diamonds, to which my hon. Friend referred. I say that without in any way indicating whether we shall, after giving further consideration to that matter, decide to extend this Clause to include them or not.

Mr. Gaitskell: Why should the hon. and learned Gentleman limit himself to industrial diamonds? As the right hon. Gentleman the Member for Torquay (Mr. C. Williams) rightly said, one could give any number of examples. There was the report of a Committee, appointed by my right hon. Friend the Member for Easington (Mr. Shinwell), which made a preliminary survey of the country's mineral resources. If the Solicitor-General studies that, he will find that the resources, although not as adequate as we should like, are at least considerably larger than many people suppose. We are anxious to see those resources developed. Here, surely, is an opportunity for giving a little encouragement to this development.
If all that the Solicitor-General is saying is, "Never mind. We had it in the Finance Act, 1940, that the concessions were to relate to minerals of a wasting

character" —I do not quite know of a mine which is not of a wasting character, but I daresay there is a legal answer to that. If all that the hon. and learned Gentleman is saying is that it was found that the applications under that Act were limited to metal and oil wells, at least there is no harm in putting in the very phrase that he used himself, "minerals of a wasting character," or something of that kind.
In the circumstances, the Solicitor-General's answer is extremely inadequate, and I should be disposed to press the matter considerably further.

Sir Herbert Williams: I had not realised, when this discussion started, that it had a bearing on a later Amendment to a new Clause in the name of the Chancellor of the Exchequer.
The chairman of an industry which is called the ballast and sand industry is one of my constituents, and some years ago, at his request, I became its president. It is the second largest productive industry of the country. It lifts about 50 million tons a year out of the earth, and incidentally, in the process defaces the countryside a little. That industry is very necessary to the conduct of the country's industry generally. Without its products no aerodrome can be constructed, no roads made, no houses built, and no large civil engineering enterprise of any kind whatever could be carried on—and yet it is a wasting asset.
Under existing circumstances, those engaged in it are being pressed to produce, probably, more than is economically desirable from the long-term viewpoint of the industry; and from their purely selfish point of view, some of them will lose money by producing too much just now. Therefore, I think that they ought to be brought into the scope of some Clause like this. Our more definite proposal appears on page 1513 of the Order Paper as an Amendment to the Chancellor's new Clause, which relates not to new enterprises, but to existing ones in respect of asbestos and, I think, oil.
I simply want to make a first claim for this very important industry, without which, as I have said, we cannot carry out the re-armament programme at all, or housing, or anything which matters to the development of the country. Therefore, if the industry is to be forced to


produce too rapidly now, it will be in difficulties in the future. There will be great difficulties in the future anyhow, because in 50 years from now, as far as can be made out, the whole of the country's supplies will have been exhausted.
The committee under the chairmanship of Major Water, V.C., which is investigating the whole problem, is comprised jointly of the Ministry of Works, the Ministry of Town and Country Planning, representatives of the industry and of the Geological Survey, and its reports indicate that supplies may be exhausted in 50 years and that in the meantime the people concerned will be ruined through the system of taxation. I hope, therefore, that Her Majesty's Ministers will give very careful consideration to the later Amendment to the Chancellor's new Clause.

4.15 p.m.

Mr. Mitchison: I find myself in a little difficulty, because I am concerned as a director in a company which mines fluorspar. Fluorspar is always found with lead, and it is a little difficult to know what kind of mining that is within the present definition. This is one of the matters that the Millard Tucker Committee have considered, although, of course, in connection with Income Tax. They have, however, considered the general point, and paragraph 229, on page 76, of their Report quotes from the Income Tax Act, 1945, the definition of
mine, oil well, or other source of mineral deposits of a wasting nature.
I think that it was that, or some similar, statutory definition that the Solicitor-General had in mind when he was speaking.
The Millard Tucker Committee, after considering the matter generally, came to the conclusion that the business profits of a concern of the kind in question could not be properly computed without a proper allowance for depletion of minerals. Apparently the case that led them to that general conclusion was what they themselves described as an "extreme" case.
It is not often that I have to give such direct support to the hon. Member for Croydon, East (Sir H. Williams), but they took the very case that he has mentioned. In paragraph 233 of their Report

they point out that if one is mining sand and gravel, one
buys a piece of land, takes out the sand and gravel either for sale or for use in the building side of its business, and after a short time is left with nothing but a hole in the ground which is valueless.
It is perfectly obvious that on logical grounds there can be no distinction, and it is equally obvious that the experienced Committee who prepared the Report—dealing, I agree, primarily with Income Tax, but dealing with the general question of taxation also—formed their opinion and made it perfectly clear that that opinion applied to all cases of a wasting asset of this kind—metal, gravel or whatever it might be.

Mr. Erroll: I do not expect that my hon. and learned Friend the Solicitor-General, when he studied the Amendment as it appears on the Order Paper, thought that there would be quite such a well presented case for a widening of the relief. Now that he has agreed to consider the case of industrial diamonds, I assure him that the case is equally justifiable for other non-metals which are mined both in this country and overseas. I am wondering, therefore, now that he has heard the arguments from both sides of the Committee, whether before the Report stage he would be prepared to consider all these nonmetals, and not just industrial diamonds.

Mr. E. Fletcher: I, too, hope that the Chancellor of the Exchequer who has listened to the discussion will have been impressed by the arguments that have been addressed to him from both sides of the Committee. I think it is now clear that the considerations which are made out for giving special concessions to companies dealing in oil wells or mines, apply with at least equal force to any companies having any kind of mines, whether metal or the marginal cases which might be called metal or something else, such as salt, china clay, and all these other things.
The point, surely, which has impressed itself upon the Chancellor's mind is that the basis for giving the additional relief is the fact that these companies are dealing with wasting assets, and, therefore, are entitled to special consideration. It does not seem that there can be any clear line of demarcation between companies owning oil wells or mines of metal, from any other company, such as the


sand and gravel companies—whether technically they are mines I do not know, nor am I sure whether mines are the same as quarries for this purpose.
Surely the principle is that any company which deals in wasting assets of that kind is in a quite different category from the company which is making textiles or aeroplanes, or products which are sold abroad, and, therefore. is entitled to special consideration. The matter was considered by the Millard Tucker Committee. We have a duty to encourage companies engaged in this kind of work in our own land, and I hope that in view of the representations from both sides of the Committee the Chancellor will at least say he will look at it sympathetically between now and Report stage.

The Solicitor-General: Hon. Members on both sides of the Committee have referred to particular industries in respect of which they felt that a case could be made out for expanding this Clause. It must be borne in mind that under the 1940 Act it was possible for those industries to come before the board of referees and make out their case for an increased percentage.
Apart from coal where they gave a small increase, the board of referees gave increases only in relation to metal mining and oil companies and, therefore, their decision, I suggest, casts some doubt upon whether some of these additional industries can come within the intention of this Clause, which is limited to metal mining and oil companies. We will give consideration to the question of asbestos. In the case of sand and gravel there is a new Clause on the Order Paper dealing with output and I think it would be more convenient to discuss that, which is a rather separate issue, when we come to the Clause.
Having regard to the decision of the Board of Referees, while we will consider the position of china clay and also asbestos, and industrial diamonds—

Mr. Gaitskell: And anhydrite?

The Solicitor-General: I am not in a position to give any assurance on that. Certainly, there was no case made out before the Board of Referees—

Mr. Gaitskell: It was not being produced.

The Solicitor-General: I am not in a position to give an assurance with regard to that. I am not sure whether it amounts to an asset from a source of a wasting nature within the meaning of the Finance Act, 1940. I cannot be more frank than that. The Committee must bear in mind the extra reliefs which are being given in addition to all companies, whether they come within this Clause or not.

Mr. Douglas Jay: We are not fully convinced. As I see it, the difficulty is why there should be any discrimination between a metal outright and a mineral which is not a metal. I am sure that what the right hon and learned Gentleman says is correct. It may be the case that other companies outside the metal field did not succeed in convincing the Board of Referees, for what reason we do not know, during the war period.
But that, surely, is no reason for not giving them a chance to do so in quite different circumstances in the future. I am glad the right hon. and learned Gentleman has agreed to look at china clay. That is a most vital and valuable industry, not only to the West Country, but to the whole of our export trade. It would be ridiculous to have a tin mine in Cornwall getting this concession and a china clay works a mile or two away being denied it. It is, however, not merely a matter of china clay. There are the anhydrite deposits in West Cumberland which are near iron ore mines. Why should the concession go to iron ore and not to anhydrite?
The right hon. and learned Gentleman is not right in assuming that anhydrite is not a wasting asset. Only this morning I was listening to an expert on anhydrite who informed me, and one or two others, that the deposits in West Cumberland will last only for a limited period of years. The right hon. and learned Gentleman can check that up if he will not take it from me, but I do not think we could expect it to be otherwise.
Then there is the question of potash in North Yorkshire which is a very important recent discovery. I take it that potash is a mineral and not a metal. Why should potash be denied this concession? I cannot see any argument for this curious discrimination, and I am sure that a real chemist or geologist could adduce many more examples than I can. Would not it be possible for the Government to say


that they will consider anhydrites, potash. gypsum and fluorspar, which I thought was a metal, and any other materials which fall into this category?

The Solicitor-General: I do not want to appear to obstruct the proceedings of the Committee. I can say to the right hon. Gentleman that we will look into the position of anhydrite. I am not sure whether it comes within the purpose of this Clause. If we had the machinery, which would involve a lot of work, it would be easy, but here we are trying to simplify the thing to a definite class of industry which comes within the definition, and I cannot give any further assurance.

Mr. Gaitskell: Do we understand that the Government are prepared to look at all the cases mentioned and at the Amendment of the hon. Member for Altrincham and Sale (Mr. Erroll) and see whether they can agree to this on Report stage? There may be arguments against it, but I must say I have not heard any so far. I do not think that the argument about machinery is so formidable.
Happily the number of producers of minerals in this country is not large. We have not the mineral resources we should have liked. I hope that the Chancellor will realise the strong argument in favour of non-discrimination, and that he will consider whether concessions can be made on the basis of a wasting asset instead of in the limited field on which the present Bill is based; and even adding thereto a few individual cases. Many other cases could have been mentioned but we merely selected the most obvious.

The Chancellor of the Exchequer (Mr. R. A. Butler): I think that my right hon. and learned Friend the Solicitor-General has given a sufficient assurance. He has already given a concession on china clay and industrial diamonds and said we will consider anhydrite sympathetically. The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) and his hon. Friends, and hon. Gentlemen on this side of the Committee are pushing us very far.
We have to pay attention to some simple considerations such as these, namely, that the capital expenditure on the natural source in question—and this is the old understanding of the Referees

—may be exhausted at a greater rate than in the case of other classes of trades or businesses. If in trying to be fair in this matter we get away from that we become unfair to other trades or businesses.
Provided that hon. Gentlemen will realise we are trying to be fair I will support the understanding given by the Solicitor-General; and it may well be possible to cover the case of anhydrites. We will look at that and pay attention to the references to other matters, but I do not want to go beyond the point at which it would be unfair in relation to other trades or businesses.
I was surprised that we could discuss sand and ballast now because there is a new Clause later on the Order Paper to which an Amendment has been put down in the name of the hon. Member for Croydon, East (Sir H. Williams). If we are to have a double discussion on everything we shall never get through the Bill.

Mr. Erroll: We are all desirous of making rapid progress, but we seem to have embarked upon a curious kind of auction. Every time the Solicitor-General gets up we have one more concession or are promised consideration. If the case is good for industrial diamonds or asbestos, and anhydrite deserves consideration, why are they not all deserving of consideration?
I suggest that the Solicitor-General might say that he will look at all the representations made to him between now and Report stage. I hope he will not feel too tied by what happened in 1940. That is 12 years ago and a lot has happened since. Conditions which applied in 1940 are not applicable today. Other classes of industry might not then have thought it necessary to apply to the Board of Referees. Because they did not in 1940 is no reason why they should have been debarred, but for our intervention today, from the benefits which are now reluctantly to be given to them.
4.30 p.m.
I suggest that the Solicitor-General should arm himself in his argument, if he needs additional argument, with the Treasury certificate. That gives all the power which he requires to safeguard himself against the abuses and difficulties which he thinks will arise. The Treasury must certify that the output is in the


national interest. There is a safeguard, if safeguard be needed.
I suggest that, meantime, he can concede the small point of agreeing to consider the representations of all nonmetal miners in addition to those who have been mentioned today. By way of helping him in his Dutch auction, if he prefers to proceed in that way, I suggest that next time he should concede the case of borax.

Mr. Gaitskell: It is obvious that it is not good enough to promise to consider a limited number of minerals. We want the Chancellor to undertake to consider, in effect, this Amendment which proposes to delete the words, "of metal." It may be that there are difficulties about drawing a line between mining generally and

other forms of business activity. We have not yet heard much about those difficulties.

The hon. Member for Altrincham and Sale (Mr. Erroll) has just indicated ways in which he thinks that those difficulties might be overcome. We are not asking a great deal. We are asking that between now and the Report stage the Chancellor should look at the whole matter again. I must emphasise that it is the whole matter that we want him to look at. I hope that he will do that, otherwise I advise hon. Members to divide the Committee.

Question put, "That 'of metal' stand part of the Clause."

The Committee divided: Ayes, 219; Noes, 182.

Division No 144]
AYES
[4.31 p.m.


Aitken, W. T.
Donner, P. W.
Keeling, Sir Edward


Allan, R. A. (Paddington, S.)
Doughty, C. J. A.
Lambert, Hon. G.


Alport, C. J. M.
Douglas-Hamilton, Lord Malcolm
Lambton, Viscount


Amory, Heathcoat (Tiverton)
Drewe, C.
Lancaster, Col. C. G.


Anstruther-Gray, Major W. J.
Dugdale, Maj. Rt. Hn. Sir T (Richmond)
Law, Rt. Hon. R. K.


Arbuthnot, John
Duncan, Capt. J. A. L.
Legge-Bourke, Maj. E. A. H.


Ashton, H. (Chelmsford)
Duthie, W. S.
Legh, P. R. (Petersfield)


Assheton, Rt. Hon R. (Blackburn, W)
Elliot, Rt. Hon. W. E
Lloyd, Maj. Guy (Renfrew, E.)


Astor, Hon. J. J. (Plymouth, Sutton)
Erroll, F. J
Lloyd, Rt. Hon. Selwyn (Wirral)


Baker, P. A. D.
Fell, A.
Lockwood, Lt.-Col. J. C.


Baldock, Lt.-Cmdr. J. M.
Fisher, Nigel
Longden, Gilbert (Herts, S.W.)


Baldwin, A. E.
Fletcher-Cooke, C
Low, A. R. W.


Barber, A. P. L.
Fort, R.
Lucas, Sir Jocelyn (Portsmouth, S.)


Baxter, A. B.
Foster, John
Lucas, P. B. (Brantford)


Beach, Maj. Hicks
Fraser, Sir Ian (Morecambe &amp; Lonsdale)
Lucas-Tooth, Sir Hugh


Bell, Ronald (Bucks, S.)
Galbraith, Cmdr. T. D (Pollok)
McAdden, S. J.


Bennett, F. M. (Reading, N.)
Gammans, L. D.
McCorquodale, Rt. Hon. M. S


Bennett, William (Woodside)
Garner-Evans, E. H.
Macdonald, Sir Peter (I of Wight)


Bevins, J. R. (Toxteth)
George, Rt. Hon. Maj. G. Lloyd
Mackeson, Brig. H. R.


Bishop, F. P.
Godber, J. B.
McKie, J. H. (Galloway)


Bossom, A. C.
Gough, C. F. H.
Maclean, Fitzroy


Boyd-Carpenter, J. A.
Graham, Sir Fergus
MacLeod, Rt. Hon. Iain (Enfield, W.)


Boyle, Sir Edward
Gridley, Sir Arnold
MacLeod, John (Ross and Cromarty)


Braine, B. R.
Grimston, Hon. John (St. Albans)
Macpherson, Maj. Niall (Dumfries)


Braithwaite, Lt.-Cdr G (Bristol, N.W.)
Grimston, Sir Robert (Westbury)
Maitland, Patrick (Lanark)


Brooman-White, R. C.
Harden, J. R. E
Manningham-Buller, Sir R. E.


Browne, Jack (Govan)
Hare, Hon J. H
Marlowe, A. A. H.


Buchan-Hepburn, Rt. Hon. P. G. T.
Harvey, Air Cdre. A. V. (Macclesfield)
Marples, A. E.


Bullard, D. G.
Harvey, Ian (Harrow, E.)
Marshall, Douglas (Bodmin)


Bullus, Wing Commander E. E.
Harvie-Watt, Sir George
Marshall, Sidney (Sutton)


Burden, F. F. A.
Head, Rt. Hon. A. H.
Maude, Angus


Butcher, H. W
Heath, Edward
Maudling, R.


Butler, Rt. Hon. R. A. (Saffron Walden)
Higgs, J. M. C.
Maydon, Lt.-Comdr. S. L.C.


Carr, Robert (Mitcham)
Hinchingbrooke, Viscount
Medlicott, Brig. F.


Carson, Hon. E.
Holland-Martin, C. J.
Mellor, Sir John


Cary, Sir Robert
Hollis, M. C.
Moore, Lt.-Col. Sir Thomas


Channon, H.
Holmes, Sir Stanley (Harwich)
Morrison, John (Salisbury)


Clarke, Col. Ralph (East Grinstead)
Holt, A. F
Nabarro, G. D. N.


Clarke, Brig. Terence (Portsmouth, W)
Hopkinson, Henry
Nicholson, Godfrey (Farnham)


Cole, Norman
Hornsby-Smith, Miss M. P
Nicolson, Nigel (Bournemouth, E.)


Conant, Maj. R. J. E.
Horobin, I. M.
Noble, Cmdr. A. H. P


Cooper-Key, E. M.
Horsbrugh, Rt. Hon. Florence
Nugent, G. R. H.


Craddock, Beresford (Spelthorne)
Hudson, Sir Austin (Lewisham, N.)
Oakshott, H. D.


Cranborne, Viscount
Hudson, W. R. A. (Hull, N.)
Odey, G. W.


Crookshank, Capt. Rt. Hon. H F C
Hulbert, Wing Cmdr. N. J
O'Neill, Rt. Hon. Sir H. (Antrim, N)


Crosthwaite-Eyre, Col. O. E
Hurd, A. R.
Ormsby-Gore, Hon. W. D


Crouch, R. F.
Hutchinson, Sir Geoffrey (Ilford, N.)
Orr-Ewing, Ian L (Weston-super-Mare)


Cuthbert, W. N.
Hutchison, Lt.-Com. Clark (E'b'rgh W.)
Osborne, C.


Darling, Sir William (Edinburgh, S.)
Hylton-Foster, H. B. H.
Partridge, E.


Deedes, W. F.
Jenkins, R. C. D. (Dulwich)
Peake, Rt. Hon O


Digby, S. Wingfield
Johnson, Eric (Blackley)
Perkins, W. R. D


Dodds-Parker, A. D.
Jones, A. (Hall Green)
Peto, Brig. C. H. M


Donaldson, Cmdr. C. E. McA
Joynson-Hicks, Hon. L. W.
Peyton, J. W. W




Pickthorn, K. W. M.
Smithers, Peter (Winchester)
Thorneyoroft, Rt. Hn. Peter (Monmouth)


Pitman, I. J.
Spearman, A. C. M.
Tilney, John


Powell, J. Enoch
Spence, H. R. (Aberdeenshire, W.)
Turner, H. F. L.


Price, Henry (Lewisham. W.)
Spans, Sir Patrick (Kensington, S.)
Turton, R. H.


Prior-Palmer, Brig O. L.
Stanley, Capt. Hon. Richard
Vane, W. M. F


Profumo, J. D.
Stevens, G. P.
Vosper, D. F


Raikes, H. V.
Steward, W. A. (Woolwich, W.)
Wakefield, Edward (Derbyshire, W.)


Rayner, Brig. R.
Stewart, Henderson (Fife, E.)
Wakefield, Sir Wavell (Marylebone)


Remnant, Hon P.
Stoddart-Scott, Col. M.
Walker-Smith, D. C.


Roberts, Peter (Heeley)
Storey, S.
Ward, Miss I. (Tynemouth)


Robertson, Sir David
Strauss, Henry (Norwich, S.)
Wellwood, W.


Robson-Brown, W.
Stuart, Rt. Hon. James (Moray)
White, Baker (Canterbury)


Rodgers, John (Sevenoaks)
Studholme, H. G.
Williams, Rt. Hon. Charles (Torquay)


Roper, Sir Harold
Summers, G. S.
Williams, Sir Herbert (Croydon, E.)


Ropner, Col. Sir Leonard
Sutcliffe, H.
Williams, R. Dudley (Exeter)


Russell, R. S.
Taylor, Charles (Eastbourne)
Wills, G.


Ryder, Capt. R. E. D.
Taylor, William (Bradford, N.)
Wilson, Geoffrey (Truro)


Salter, Rt. Hon. Sir Arthur
Teeling, W
Wood, Hon. R.


Schofield, Lt.-Col. W. (Rochdale)
Thomas, Rt. Hon J. P. L. (Hereford)



Scott, R. Donald
Thompson, Kenneth (Walton)
TELLERS FOR THE NOES:


Scott-Miller, Comdr. R.
Thompson, Lt.-Cdr. R. (Croydon, W.)
Mr. T. G. D. Galbraith and




Mr. Redmayne.




NOES


Acland, Sir Richard
Hannan, W.
Plummer, Sir Leslie


Albu, A. H.
Hardy, E. A.
Porter, G.


Awbery, S. S.
Hargreaves, A.
Price, Joseph T. (Westhoughton)


Bartley, P.
Harrison, J. (Nottingham, E.)
Pryde, D. J.


Bellenger, Rt. Hon. F. J.
Hayman, F. H.
Rankin, John


Bence, C. R.
Henderson, Rt. Hon. A. (Rowley Regis)
Reeves, J.


Benn, Wedgwood
Herbison, Miss M.
Reid, Thomas (Swindon)


Benson, G.
Hobson, C. R.
Reid, William (Camlachie)


Bevan, Rt. Hon. A. (Ebbw Vale)
Holman, P.
Rhodes, H.


Blackburn, F.
Holmes, Horace (Hemsworth)
Roberts, Albert (Nurmanton)


Blenkinsop, A.
Houghton, Douglas
Robinson, Kenneth (St. Pancras, N.)


Blyton, W. R.
Hoy, J. H.
Rogers, George (Kensington, N.)


Braddock, Mrs. Elizabeth
Hudson, James (Ealing, N.)
Schofield, S. (Barnsley)


Brockway, A. F.
Hughes, Emrys (S. Ayrshire)
Shackleton, E. A. A


Brook, Dryden (Halifax)
Hynd, H. (Accrington)
Shinwell, Rt. Hon. E.


Broughton, Dr. A. D. D.
Hynd, J. B. (Attercliffe)
Shurmer, P. L. E.


Brown, Thomas (Ince)
Irvine, A. J. (Edge Hill)
Silverman, Julius (Erdington)


Burke, W. A.
Isaacs, Rt. Hon. G. A.
Silverman, Sydney (Nelson)


Burton, Miss F. E.
Janner, B.
Simmons, C. J. (Brierley Hill)


Callaghan, L. J.
Jay, Rt. Hon. D. P. T.
Slater, J.


Castle, Mrs. B. A.
Jeger, George (Goole)
Smith, Ellis (Stoke, S.)


Champion, A. J.
Jeger, Dr. Santo (St. Pancras, S.)
Smith, Norman (Nottingham, S.)


Chapman, W. D.
Jenkins, R. H. (Stechford)
Snow, J. W.


Chetwynd, G. R.
Johnson, James (Rugby)
Sorensen, R. W.


Clunie, J.
Johnston, Douglas (Paisley)
Sparks, J. A


Cocks, F. S.
Jones, David (Hartlepool)
Steele, T.


Coldrick, W.
Jones, Frederick Elwyn (West Ham, S.)
Stewart, Michael (Fulham, E.)


Collick, P. H.
Jones, Jack (Rotherham)
Stokes, Rt. Hon. R. R.


Crosland, C. A. R.
Keenan, W.
Strachey, Rt. Hon. J.


Cullen, Mrs. A.
Key, Rt. Hon. C. W.
Strauss, Rt. Hon. George (Vauxhall)


Daines, P.
Kinley, J.
Summerskill, Rt. Hon. E.


Dalton, Rt. Hon. H
Lee, Frederick (Newton)
Swingler, S. T.


Davies, A. Edward (Stoke, N.)
Lewis, Arthur
Sylvester, G. O.


Davies, Ernest (Enfield, E.)
Lindgren, G. S.
Taylor, John (West Lothian)


Davies, Harold (Leek)
Lipton, Lt.-Col M.
Taylor, Rt. Hon. Robert (Morpeth)


Deer, G.
Logan, D. G.
Thomas, David (Aberdare)


Dodds, N. N.
MacColl, J. E.
Thomas, Ivor Owen (Wrekin)


Donnelly, D. L.
McGhee, H. G.
Thorneycroft, Harry (Clayton)


Driberg, T. E. N.
McInnes, J.
Thurtle, Ernest


Ede, Rt. Hon. J. C.
McLeavy, F.
Tomney, F.


Edwards, John (Brighouse)
MacPherson, Malcolm (Stirling)
Viant, S. P.


Edwards, Rt. Hon. Ness (Caerphilly)
Mainwaring, W. H.
Wallace, H. W.


Edwards, W. J. (Stepney)
Mallalieu, J. P. W. (Huddersfield, E.)
Webb, Rt. Hon. M. (Bradford, C.)


Evans, Albert (Islington, S. W.)
Manuel, A. C.
Wells, Percy (Faversham)


Evans, Edward (Lowestoft)
Mellish, R. J.
Wells, William (Walsall)


Field, W. J.
Mikardo, Ian
West, D. G.


Fienburgh, W.
Mitchison, G. R.
Wheatley, Rt. Hon. John


Fletcher, Eric (Islington, E.)
Morrison, Rt. Hon. H. (Lewisham, S.)
White, Henry (Derbyshire, N. E.)


Follick, M.
Moyle, A.
Wigg, George


Forman, J. C
Mulley, F. W.
Wilkins, W. A.


Fraser, Thomas (Hamilton)
Murray, J. D.
Willey, Frederick (Sunderland, N.)


Freeman, John (Watford)
Noel-Baker, Rt. Hon. P. J.
Williams, Ronald (Wigan)


Gaitskell, Rt. Hon. H. T. N.
O'Brien, T.
Williams, Rt. Hon. Thomas (Don V'll'y)


Gibson, C. W.
Oliver, G. H.
Williams, W. R. (Droylsden)


Glanville, James
Oswald, T.
Williams, W. T. (Hammersmith, S.)


Grey, C. F.
Padley, W. E.
Wilson, Rt. Hon. Harold (Huyton)


Griffiths, David (Rother Valley)
Paget, R. T.
Woodburn, Rt. Hon. A.


Griffiths, Rt. Hon. James (Llanelly)
Paling, Rt. Hon. W. (Dearne Valley)
Wyatt, W. L.


Griffiths, William (Exchange)
Pannell, Charles



Hale, Leslie (Oldham, W.)
Pargiter, G. A.
TELLERS FOR THE NOES:


Hall, John (Gateshead, W.)
Paton, J.
Mr. Royle and Mr. Arthur Allen.


Hamilton, W. W.
Pearson, A



Question put, and agreed to.

The Solicitor-General: I beg to move, in page 51, line 30, at the end, to insert "four per cent."
This Amendment is in anticipation of the new Clause put down by my right hon. Friend, under which, for Excess Profits Levy purposes, borrowed money will rank for the allowance of 4 per cent., in addition to the deduction of the interest in the computation of profits. Its effect will be that companies in this particular section will be entitled to the additional percentage on top of the percentage on the borrowed money.

Amendment agreed to.

The Solicitor-General: I beg to move, in page 51, line 31, to leave out "and."
I think it would be convenient for the Committee if we were to take this Amendment and the next three together, as they all deal with the same point. The second Amendment—in line 31, after the third "cent.," to insert "and fourteen per cent."—is merely consequential on the Chancellor's proposal to give an increase of 2 per cent. in the extra percentage allowance of 10 per cent. or 12 per cent. for director-controlled companies. The first two Amendments give effect to the decision which my right hon. Friend has already announced to increase the percentage allowances to companies because these allowances are increased from 4 to 6 per cent. in the one case and from 2 to 3 per cent. in the other.

Amendment agreed to.

Further Amendments made: In page 51, line 31, after third "cent.," insert "and fourteen per cent."

In line 35, leave out "four," and insert "six."

In line 37, leave out "two," and insert "three." —[The Solicitor-General.]

4.45 p.m.

Mr. Roy Jenkins: I beg to move, in page 52, line 10, at the end, to insert:
and provided also that if after an estimate (herein referred to as the earlier estimate) of the total potential output of a source has been made for the purposes of this subsection, it shall appear on an estimate of such output (herein referred to as the later estimate) being made for the purposes of any subsequent chargeable accounting period that the earlier estimate as too low by not less than ten per cent., the liability of the body corporate in question to the excess profits tax for all

chargeable accounting periods prior to the chargeable accounting period for the purposes of which the later estimate was made shall if the body corporate so require he recomputed accordingly, and all necessary reliefs by way of repayment or otherwise shall be afforded to such body corporate, but no such recomputation shall be made in any case in which the result thereof would or might be to increase the liability of that body corporate or any other person to the excess profits levy or to any other tax.
First of all, I have to tell the Committee that there is, unfortunately, a bad drafting error in this Amendment. We very much regret it, but it is not entirely unknown that even the Treasury Bench, with all the assistance available to them, have been known to make one or two small errors in drafting. The error is that the word "low" should be "high."
The purpose of the Amendment is to clear up what seems to be an illogical anomaly, and, at the same time, to give a small concession to certain companies. We are here dealing with companies operating metal mines and oil wells, and the Bill provides that where the estimated life of the source is less than 30 years, the companies are able to add this 6 per cent., and, where the estimated life is more than 30 years, to add 3 per cent.
The position under the Clause as it stands is that an estimate of the life of the source, apparently, has to be made in each chargeable accounting period, and if, subsequently, it appears that the estimate is false, there is no provision for any retrospective correction. I could quite understand that, in operating this tax, the Government are anxious to have some finality, but, on the other hand, if one deals with other parts of this Bill concerning the Excess Profits Tax—and I am now thinking of the overriding 18 per cent.—the Government seem to have no desire at all to reach any finality, but wish to go on correcting and re-correcting year after year in the same complicated way, as long as the company remains in existence.
It seems peculiar that there should be no allowance made here for the correction of which proves to be an original error, and I should have thought that the Solicitor-General, if he is to reply, would have been prepared to admit that, in the case of estimating the life of sources such as those with which we are dealing here, it was only too possible to say, in


a particular year, that the life of the source may be 35 years, whereas, in a year or two, the expectation of life from time at which the previous estimate was made was, in fact, not 35 years, but only 20 or 25 years, something which would bring that source into a different category so far as these considerations are concerned.
I would urge upon the Government that, although this is not a big point, it is a point of substance, and that they should see whether they cannot bring such companies into line with the provisions as far as the over-riding tax is concerned, so that, where an estimate has been proved false, retrospective correction could be allowed, which would be a small benefit to the companies concerned.

The Solicitor-General: The alteration of the Amendment is of a rather drastic character, and I am now unable to make the powerful speech which I was hoping to make in dealing with the Amendment as it was drafted. It has now been completely reversed, and, though I make no complaint at all, its effect would be the exact opposite of that of the Amendment on the Order Paper.

Mr. Jenkins: I think I am right in saying that, as originally drafted, the Amendment had no effect at all.

The Solicitor-General: No; I do not think so. As I understand the effect would be that, if a company had been so unwise as to invoke the operation of the Amendment as it was originally drawn, the only effect would have been to lower the percentage to which that company was entitled, and so increase its liability to E.P.T. It would not, in fact, have been a relief.
May I now deal with the point of the Amendment as it has been altered? The hon. Gentleman indicated that there is a great deal to be said about regarding a tax of this sort as being final. Although we may say that there is an argument there, if we suppose that the first estimate was shown by a later estimate to be wrong, and we provided machinery whereby the first estimate could be corrected, it could be equally true that a subsequent estimate might prove both the first and the second estimates to have been wrong; and so we may go on. I

can assure the hon. Gentleman that the mining industry itself has not raised this point, and, if they have felt that it was one of great importance, no doubt they would have done so. In these circumstances, and having regard to the desirability of finality, we think it would be best to leave the Clause as it stands and not accept an Amendment on the lines proposed by the hon. Gentleman.

Sir Frank Soskice: I think that we have had a disappointing answer. It is, as I understand it, that we might have estimate No. 1 which puts the life of a mine at, say, 35 years, and then we might have estimate No. 2 which brings it down to 25 years, and that if the matter stopped there, there would be a good deal in it. The hon. and learned Gentleman, asked why, in these circumstances, we cannot do what is manifest justice said the reason was because there might be a third estimate which put up the period once more to 35 years, or even to 45 years.
That seems to me to be a most unlikely hypothesis. Everything is possible in this most extraordinary world, I quite agree, but in my submission that is a somewhat tenuous argument. The hon. and learned Gentleman agreed that there might be an erroneous estimate—an estimate which may turn out on a subsequent re-calculation to have been wholly erroneous—and that it might, in those circumstances, appear that a company was paying the Excess Profits Levy at a higher rate than it would be paying if the proper estimate had been made in the first instance.
Having accepted that as the first stage in the consideration of this Amendment and having accepted the logic and the justice of that position, the hon. and learned Gentleman then says the Government will do nothing about it. What he is really saying is that the Government will not accept this Amendment, or indeed any other Amendment, simply because it may subsequently turn out that there might be a third, fourth or fifth estimate which may be wrong.
1 do not know whether the hon. and learned Gentleman really thinks that that is a kind of argument on which one can ride off in a matter of this sort. I could have understood it if he had begun his argument by saying that such an error


is never made. I would then have disagreed with him on the facts, because, so understand, it is an error which can easily be made. But, as I say, having accepted the justice of the argument behind the Amendment and then to say that it is proposed to do nothing at all about it simply because in some very rare cases there may be a third or fourth estimate which may differ from the first or second, seems to me the most illogical position to take up.
We do not like this tax at all as it stands, but, if we are going to have it, for goodness sake let us make it as logical and as sensible as we can. Quite clearly, to tax a company on the basis of a purely mistaken estimate is neither logical nor fair. The fact that the mining interests have not hit upon this particular defect in the structure of the tax does not strike me as a good argument for rejecting this Amendment. No doubt there are many other defects in the tax which will be unearthed as time goes on.
But here is a defect which has been brought to the light of day, and, surely, having accepted the justice of the case, and having had put before him a draft which he may or may not like—we did our best to give such assistance as we could by our drafting—the hon. and learned Gentleman will, I hope, be so good as to say that he will take it away with him and study it, and that if he cannot improve upon it he will at least do something to remove this obvious injustice.
If he is really troubled that there might be a third, fourth or fifth estimate which might belie the first or the second, that is quite an easy situation to provide for. He merely has to say that the recalculation can be made once or twice, and no more. What we have done, foreseeing the possibility that there may be a number of different estimates in the life of a mine, is to say that there shall be no re-computation unless the estimate is shown to be at least 10 per cent. out. Having put in that safeguard, I should have thought we had gone a long way to make the Clause work.
If there were to be a re-calculation each time it was said that the original estimate was at all out, then I would agree with the hon. and learned Gentleman that perhaps we had made for instability, but having put in the safe-

guard that a company must be able to show at least a 10 per cent. error, I should have thought we had put on the Order Paper a very workable Amendment.
I very much hope that the hon. and learned Gentleman will not merely stonewall in that very unsympathetic manner when he really has no case for doing so. Those who briefed him in this matter have not given him anything to say, and I hope he will say that he wants better briefing than that, and that if he does not get it he must accept the justice and cogency of the arguments from this side of the Committee.

The Solicitor-General: I am rather surprised that the right hon. and learned Gentleman should take up that attitude on this Amendment. As he knows perfectly well, this is really not the Amendment moved by his hon. Friend. The Amendment on the Order Paper is quite different owing to the drafting error. In dealing with the arguments which I advanced, the right hon. and learned Gentleman seemed to appreciate that there might be difficulty with a number of estimates, but the point which I stressed was that put by the hon. Member for Stechford (Mr. Jenkins), the desirability of there being finality in regard to this tax. I am advised that if a clear error were made in the computation of the tax that could be adjusted under Clause 54 (2). Therefore, I am very doubtful whether any complicated procedure of this sort is really necessary at all.
However, I can tell the right hon. and learned Gentleman that we are not at all unsympathetic on this point, and that we certainly want to make this tax as fair and as equitable as it can be made. We have had very little opportunity to consider what is the real point behind the Amendment, because I am sure the right hon. and learned Gentleman will agree that it is not immediately apparent on reading the Amendment on the Order Paper. Therefore, I can say to the right hon. and learned Gentleman that although I cannot give him any assurance that we will make any Amendment—indeed, I doubt very much whether one is necessary in view of the powers in Clause 54 (2)—we will certainly consider the matter again between now and the Report stage now that we know what is at the back of the Amendment.

Mr. Peter Roberts: I am glad that my hon. and learned Friend the Solicitor-General has said that he will look at this matter again, because he used one argument which I did not quite follow. He said that because representations had not been made to him by industry he felt that this Amendment should not be considered. I hope that argument will not be allowed to go unchallenged either on this Amendment or on any other.

Mr. Jenkins: The hon. and learned Solicitor-General complained that the Amendment on the Order Paper was rather different from that originally put forward, but his second speech was utterly different from his first speech, and I imagine that he had time for a little thought between the two. He began by saying that he himself was shocked at what he had said in his first speech. I do not know whether that is significant or not.
I am glad that the hon. Member for Heeley (Mr. P. Roberts)—although I do not often agree with him—emphasised the point about there being no pressure from mining interests. The Chancellor of the Exchequer was extremely annoyed the other day when he thought that somebody on this side of the Committee was accusing him of giving way to City pressure. He said that was absolute nonsense. Therefore, it is no good the hon. and learned Gentleman the Solicitor-General coming along and saying that this is not a serious point because there has been no pressure from mining interests.
I am glad to know that he is now taking up a more sympathetic attitude, because he really did put forward a number of rather contradictory reasons for not accepting this Amendment. If I now understand him to say that because of the drafting error he wants more time to look at it, and that if the point is not covered by Clause 54 (2) he will put something down on the Report stage, I shall be satisfied.

5.0 p.m.

The Solicitor-General: I am not committing myself or the Government to putting anything down, but we shall look into it very carefully.

Mr. Jenkins: In that case I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause, as amended, ordered to stand part of the Bill.

Clause 48.—(LOCAL AND PUBLIC AUTHO RITIES, STATUTORY UNDERTAKERS, ETC.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Crosland: I gather, Mr. Bowles, that you are not selecting the Amendment standing in the name of my hon. Friend the Member for Stechford (Mr. Roy Jenkins) and my hon. Friend the Member for Edmonton (Mr. Albu), to leave out subsection (3) of this Clause. That being so, I should like to raise a question on that subsection.
It is clear from the fact that no exception is made of the British Broadcasting Corporation and other statutory undertakers of that sort on the early Clauses that they are subject to the levy. This is the subsection which enables a proper assessment of their profits to be made for the purposes of the levy. Therefore, I am taking the opportunity of asking why the B.B.C. and the other statutory undertakers mentioned, should be subject to the levy.
The position at present is that the B.B.C. and other bodies are not subject to profits taxation. That being the case, why should they be subject to the Excess Profits Levy? On the face of it, it seems a curiously contradictory situation that they should be exempt from tax on ordinary profits year in and year out and then the Government impose what was originally intended to be a re-armament levy, and, ironically enough, make the B.B.C. subject to it. At first sight it is clearly the most ironical and contradictory situation one could imagine.
I imagine that the main reason why it was the decision of past Governments not to subject the B.B.C. to the Profits Tax is that one cannot speak of the B.B.C. as having made a profit in the ordinary sense of the word. Nor can one speak of the B.B.C. as having made excess profits in the ordinary sense of the term. After all, if there are excess profits that are to be taxed under this new levy these extra profits will be due to a rise in the demand


for the products of a particular industry or firm. That rise in demand will be reflected in higher prices or higher output or both. In consequence, profits will rise, and those additional profits are to be subject to the levy.
That situation cannot arise in the case of the B.B.C. or statutory undertakers of that kind because the profits of the B.B.C. are not a function of the demand of consumers. They are, in fact, the function of a decision of the Government, namely, a decision about the distribution of the revenue from wireless and television licences, and so on, between the Government and the Corporation.
It is quite true, of course, that profits from "The Listener" and other B.B.C. publications come into a separate category; but, by and large, it is true to say that the profits of the B.B.C. do not depend upon market forces, public demand, or upon the consumers. They depend upon the fiat of the Government when they decide how to distribute licence revenue between themselves and the Corporation.
That being so, one cannot talk about the income of the B.B.C. as though it were profits in the ordinary, normal, everyday economic sense of the term. They are not profits in that sense. The income of the B.B.C. is decided by a pre-determined administrative decision and not by the ordinary workings of consumer demand. All this was recognised in the case of Profits Tax, because presumably it was for this, among other reasons, that the Corporation and other statutory undertakers mentioned in this Clause were exempted from Profits Tax. If it was recognised in the case of Profits Tax that the B.B.C. are not in the position of the ordinary undertaking, why is it not recognised in the case of E.P.L., the more so because if there is one body in the country whose excess profits, if any. are patently not a fortuitous result of the re-armament drive surely that body is the B.B.C.?
Nobody could possibly pretend that theirs would be a case of profiteering from the arms drive. The whole position is preposterous from that point of view. In view of the fact that the Chancellor of the Exchequer was sympathetic to the idea of restricting this levy to re-armaments profits, but said it was impracticable, it is strange that he did not choose

the practical opportunity of exempting statutory undertakers of this sort, and the B.B.C. in particular; because one can clearly say that any excess over standard income is patently not due to re-armament in the case of the B.B.C. Nobody could say, to use the Chancellor's own phrase, that the B.B.C. are one of the merchants of death.
In view of the fact that the profits are due to administrative decision by the Government and any excess profits made cannot be conceivably related to the effect of the re-armament programme, it seems to me there would be a very strong case for exempting the B.B.C. I should like the Government to explain why a public Corporation like this, who are exempt from the Profits Tax, should be subject to E.P.L. The B.B.C. have had something of a reprieve from the Government from some of the wilder notions of the wilder back benchers opposite. One would have thought that since the Government seem to have the interests of the B.B.C. at heart they would not only have rejected those wilder notions but would have exempted the B.B.C. from this Excess Profits Levy.

Mr. Boyd-Carpenter: The subsection of this Clause to which the hon. Member for Gloucestershire, South (Mr. Crosland) confined his remarks does not impose the levy upon the B.B.C. The B.B.C. are a body corporate and the tax is therefore imposed upon them under the general charging provisions of Clause 31. I do not know how far in the circumstances you, Mr. Bowles, will permit me to reply to the question whether or not the B.B.C. should be subject to this levy. The right hon. Gentleman the Member for Battersea, North (Mr. Jay) managed to make such replies on a great many occasions in the past.

The Temporary Chairman (Mr. Frank Bowles): The Chairman decided not to select this Amendment. Therefore, I think he imagined that there could be adequate discussion of the point on the Question that the Clause stand part of the Bill. But do not let us go back to Clause 31.

Mr. Boyd-Carpenter: Had the Amendment in the name of the hon. Member for Stechford (Mr. Roy Jenkins) been accepted, its effect would not have been to exempt the B.B.C. from the Excess


Profits Levy but to deprive the B.B.C. of the opportunity of having a profits standard under the Bill. What this subsection does, in dealing both with the B.B.C. and certain other statutory undertakings which, not being subject to Profits Tax during standard years have no profits standard, is to proceed to deprive them of that disadvantage by giving them a profits standard.
That is the purpose of this subsection. In that event, if the Amendment had had the good fortune to be selected the last person to desire that it should be pressed to a Division would be the hon. Member for Gloucestershire, South, because he wants the B.B.C. to be treated better whereas the Amendment would have treated the B.B.C. worse.
The hon. Member for Gloucestershire, South was not quite right in what he said. It is true that last year the B.B.C. were exempted from Profits Tax, but other bodies concerned, namely, road transport undertakings, were not so exempted. The only body concerned with this subsection which is at present exempted from Profits Tax is the B.B.C. The others previously so exempted were made liable under last year's Finance Bill.

Sir Geoffrey Hutchinson: For the first time.

Mr. Boyd-Carpenter: It is not for me to explain the reasons why the B.B.C. were exempted. I think one very reasonable factor that must have been considered at the time was that the whole future of the B.B.C. was obviously shortly to be under review, and it may well be that the Government of the day thought it an appropriate moment to leave the taxation position of the B.B.C. out of consideration.
It is, of course, a fact that the B.B.C. were subject to the war-time Excess Profits Tax. Therefore, I do not think it is possible—as the hon. Gentleman the Member for Gloucestershire, South suggested—to elevate the B.B.C. into the position where the Profits Tax or the Excess Profits Levy was an intolerable imposition. It was, in fact, done under a war-time tax and it does seem reasonable that this tax should be universal.
I do not suppose, Mr. Bowles, that you will allow me to go very far into that

argument; but it is not entirely accurate to say that the B.B.C. are immune from the economic effects of the re-armament programme; nor, indeed, are certain of its activities—such as the production of "The Listener"—activities which do not compete with other activities which are so subject to tax. I think that in so far as it competes it would be very unfair to its competitors to give it an exemption which other companies do not have. I agree that it does not go over the whole of the field, but it does go over its publishing activities which, as I think the hon. Gentleman knows, are nowadays on a very substantial scale.
We thought it right, under this Bill, to do what was done during the late war and subject the B.B.C. to the same tax which was being imposed upon other companies. In so doing we did not fail to notice the point to which the hon. Gentleman has referred—the exemption of the B.B.C. from Profits Tax last year—but we did feel that the exemption in that case was probably due to the very special circumstances to which I referred a moment or so ago.
By passing Clause 31 the Committee has agreed to the imposition of the tax, and what this subsection does is to take care of the difficulty which would have arisen both for the B.B.C. and certain other statutory undertakings, in that they would not otherwise have had a profits standard on which to rely. It is for that reason that these words are put into this Bill.

Mr. Crosland: I appreciate the points which have been made by the Financial Secretary—in particular, the point about the deletion of this subsection, which would have the effect he says—but would not he agree that in the particular case of the B.B.C., owing to the division of the licence revenue between the Corporation and the Government, it would be possible to alter the chargeable profits in the future in a most haphazard way, if it were decided that there should be a different distribution of the licence revenue.
I wonder if the hon. Gentleman would agree that during the period of operation of the Excess Profits Levy it is clearly important that the Government should not change the present distribution between the two bodies, otherwise it will increase or diminish the profits of the B.B.C. in a quite fortuitous manner.

Mr. Boyd-Carpenter: There is obviously a lot in what the hon. Gentleman has said, but I think he put it a little too high, because the tax liability in relation to the Excess Profits Levy depends not only on the amount of licence revenue but on the operating costs of the Corporation itself. We have no wish to treat the B.B.C. unfairly, but it is the essence of this case that we should wish to treat them as we treat everyone else.

Clause ordered to stand part of the Bill.

Clause 49.—(NATIONALISED UNDERTAKINGS.)

Mr. Boyd-Carpenter: I beg to move, in page 53, line 27, at the end, to insert:
subject, in the case of the National Coal Board, to the provisions of the next following subsection.
This is simply a paving Amendment for the one immediately following, which is much longer.

Amendment agreed to.

5.15 p.m.

Mr. Boyd-Carpenter: I beg to move, in page 54, line 4, at the end, to insert:
(4) Paragraph (a) of the last preceding subsection shall not apply in relation to the National Coal Board, but the National Coal Board may, in relation to any chargeable accounting period, elect that its standard profits for a full year shall be computed as if—

(a) at the end of the year nineteen hundred and fifty-one all compensation and payments provided for by sections ten, seventeen, eighteen and forty-four of the Coal Industry Nationalisation Act, 1946, had been made by the issue of stock at par;
(b) no increase in the amount of that stock had occurred after the end of that year;
(c) at the time of any payment made by the Board to the Crown under section twenty-eight of the said Act of 1946 in respect of expenses and liabilities incurred by virtue of the provisions of the said sections a decrease had occurred in the nominal amount of that stock equal to so much of the payment as represents principal; and
(d) it had had from time to time paid-up share capital of an amount bearing to the amount of stock arrived at under the preceding paragraphs of this subsection the same proportion as so much of the payments referred to in paragraph (c) of subsection (3) of section forty of the Finance Act, 1947, as fell, by virtue of that subsection, to be disallowed in computing the profits of the Board for the purposes of the profits tax bears to the full amount of those payments.

(5) For the purposes of section (Addition to standard profits in respect of borrowed money) of this Act—


(a) the following amounts shall, subject as hereinafter provided, be deemed to be borrowed money of the National Coal Board, that is to say—

(i) the nominal amount of any stock treated under paragraph (a) of the last preceding subsection as having been issued, decreased as provided by paragraph (c) of that subsection; and
(ii) the nominal amount of the stock issued under section thirty-two of the Coal Industry Nationalisation Act, 1946, decreased by so much of any payment under section twenty-eight of that Act as represents principal of that stock;

(b) to the extent that responsibility in respect of any stock issued by the Gas Council is allocated under section forty-four of the Gas Act, 1948, to an Area Gas Board, the stock shall be deemed not to be borrowed money of the Gas Council but shall, subject as hereinafter provided, be deemed to be borrowed money of that Area Gas Board;

and to the extent that the nominal amount of any stock is taken into account under subsections (3) and (4) of this section for the purpose of computing the standard profits for a full year of a body corporate, it shall be disregarded in computing the average amount of that body corporate's borrowed money in any period.
I must apologise to the Committee for the length of this Amendment, which is intended to deal with the position of the National Coal Board in respect of liability to this tax. As hon. Members will have noticed from their reading of the Clause, we propose a special type of assessment for the nationalised industries. We took note of the fact that for Profits Tax purposes a line was drawn between the interest on that part of the compensation stock which related to debentures and other loan capital and that part which related to the dividends of the former colliery companies.
It is therefore provided in this Clause that only that part of that interest on compensation stock which related to profits shall be treated as profits for the purpose of this levy. We feel that this is the only satisfactory way to deal with the nationalised industries in general, since to try to assess a profits standard by adding together the profits or standards in money would—because of the hundreds of private enterprises prior to nationalisation—be an impossible task.
In the case of the Coal Board, however, it is not possible to apply that solution. The reason is that owing to the method of assessment of compensation under the Coal Industry Nationalisation Act, only about half the compensation


stock has been distributed, and if we applied to the Coal Board the same rules as apply to the other nationalised industries we should be treating them very unfairly, because they would only be allowed to call in aid about half of the compensation stock.
What we have done has been to provide that all the compensation stock shall be treated as having been issued by 30th December, 1951, and then, proceeding on that assumption, to apply the general proposals for the nationalised industries to which I have referred.
The Amendment also contains a small alteration as regards nationalised industry generally, inasmuch as, so far as compensation stocks are taken into account for the purpose of computing standard profits as if they represented share capital, they shall not also get an allowance in respect of borrowed money.

Mr. P. Roberts: I should like to ask a question. I have tried to follow the argument which has been put forward. As I understand, the Coal Board were trading during the whole of 1947, 1948 and 1949—over the period of the standard years. The only difficulty they would have is that they could not call in aid nine months of the year ending in 1947. This Amendment merely deals with that period of nine months and gives them the opportunity to average that over the whole three years or two years.
Is that the argument, or is it the fact that the Coal Board can take as their standard a figure based on the dividend compensation which was payable? That is the point about which I am not quite sure.

Mr. Boyd-Carpenter: I hope that my hon. Friend followed what I said about the general provisions of this section in respect of the nationalised industries. They are given this general basis on the division of the compensation stock into, as it were, loan capital and dividend-paying capital. On top of that we have superimposed—for the reasons I have given—this particular provision for the Coal Board; but apart from this particular provision they share the general provisions for the nationalised industries as a whole.

Mr. Roberts: I appreciate that; but the point is that if they took it on a

standard basis they would have quite a substantial loss, which would increase their liability to Excess Profits Levy when they come to the accounting period. It appears that by adopting this method Her Majesty's Government are giving quite substantial assistance to the Coal Board by letting them off Excess Profits Levy which, had they been ordinary trading companies or ordinary coal companies, they would have had to continue to pay. I appreciate that that may be a question of principle on which the Government have dealt with all the nationalised industries, but the Coal Board seem to come out of it rather well.

Mr. Boyd-Carpenter: I do not want to follow my hon. Friend into an argument about the particular tax liability of a particular taxpayer. He knows very well that that is not a matter which is normally appropriate for discussion from this Box, but he is right when he says that the intention is to give as nearly as possible the same treatment as to all the nationalised industries.

Amendment agreed to.

Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Mr. Crosland: This seems to me to be one of the most important sections in the whole E.P.L. range and the curious thing is that it has provoked hardly any public discussion. That may well be because of the difficulty of understanding it, as one of my hon. Friends has said. I want to ask one or two questions from the point of view of elucidation. Reams and reams of paper have been covered on many other Clauses but this, which exempts the whole of the nationalised sector, has had practically no public discussion, and I am concerned to know what the effects of the Clause are likely to be.
The most important fact about this Clause is that it exempts the whole of the public sector from the operation of Clause 41, which is the Clause about the transfer of the whole or part of a body corporate's undertakings as a going concern. Clearly, the bulk of the nationalisation in the last few years was in the three years 1947, 1948 and 1949, and, therefore, a great number of going concerns were transferred to one or other of the nationalised industries. In fact, the


nationalised industries consist of very little more than concerns which were transferred to them as going concerns during the standard years.
This Clause is, therefore, of very great importance, and the simple question I want to ask is this: Why were the nationalised industries and the bodies transferred to them deliberately exempted from Clause 41 and the Tenth Schedule? There must be some reason for it, but it is not at all clear—and certainly not clear to me—why this decision was taken. The second question is Broadly speaking, what will the effects be? What will they be on the transferors and the transferees? The amount of capital involved is enormous.
No one can dismiss this as being quantitatively of little importance. It is quantitatively of enormous importance in terms of national income and national capital and in terms of the country's trade, commerce and output. In fairness, we should have a rather long statement on the reasons which prompted the Government to exempt the whole of the public sector from Clause 41.
May I put one or two more detailed points which concern some of the transferors—that is to say, some of those bodies which transferred to or were bought out by nationalised undertakings during the standard years? I hope that the Financial Secretary will not find me tedious, but I want to return to a series of points which I put to him about Bristol when we last discussed these matters and on which I did not get an entirely satisfactory reply. Probably I took him by surprise and did not give him enough notice. I raised this case because there are a number of other bodies in the same situation.
I am concerned about a local authority which operated an electricity undertaking which was transferred to the British Electricity Authority on 1st April, 1948, which, as hon. Members know, was vesting date for electricity nationalisation. The obvious thing one would have expected was that the transfer of a going concern would have been covered by Clause 41 and the Tenth Schedule, but Clause 49 exempts them from the provisions of that previous Clause and that Schedule.
Take the case of a local authority which had such an undertaking and take

also the case—because this is the difficulty, and it is not an uncommon case—in which the local authority concerned made a loss on that electricity undertaking in the 15 months before 1st April, 1948. What are the local authority to do when E.P.L. comes along? Under the Amendments tabled by the Chancellor, they have two possibilities, and I suggest that one of them is grossly unfair to the local authority and that the other is grossly unfair to the Revenue. I am not simply putting the case of the local authority; I am concerned with the general justice of the case.
The first possibility is that the local authority may choose to be assessed on their profits during the standard years, in two years of the three, 1947, 1948 and 1949. In the case of Bristol, they made a very substantial loss on their electricity undertaking during the pre-nationalisation period. That means that even if they chose the years 1948 and 1949—which, of course, they will do, in order to exclude 1947, when the predominant part of their losses occurred—their standard profits will include one quarter of a year's very substantial loss. Since they are not touched by Clause 41, they cannot transfer their losses to the B.E.A. in the same way as a private undertaking could have done. The loss will drag down their standard profits and increase their liability to E.P.L.
Thus, their liability to E.P.L. has to be covered by their other commercial undertakings. In such cases, it may be a water undertaking or a transport undertaking, but in the case of Bristol the most important remaining commercial undertaking is the docks. That is not the case with many docks, but it is the case that in Bristol the docks are owned by the Corporation and they are extremely well run. Indeed, they are famous all over the country. The docks would have to pay an additional E.P.L. liability which was not due to their own standard profits being unsatisfactory and was not due to the whole of the remaining standard profit of Bristol Corporation being in any way unsatisfactory. It would have to pay this additional liability because of the losses of the electricity undertaking during the standard years.
I maintain that this possibility is blatantly unfair to Bristol Corporation—that a successful undertaking such as the


docks should have to bear the consequence of a previous loss on the part of a quite separate undertaking which has now been transferred to B.E.A. and with which Bristol Corporation have nothing whatever to do. There are a number of cases like this which would have been hidden beneath Clause 41. Under that Clause there would have been no difficulty, for the case of a local authority in such circumstances would have been covered. The right thing would be that the figures relating to the transferred undertaking, in this case the electricity undertaking, should be excluded from the calculations of the corporate body's standard profits, and Clause 41 was introduced precisely to achieve such a result. I should like an explanation why this sector of companies which have been brought under public ownership was excluded from the Clause.
That is the first possibility which, I maintain, is grossly unfair to the local authority concerned. Ironically enough, the second possibility is too fair to the local authority and unfair to the Revenue. In that case the local authority choose to be assessed for liability not on their profit during the standard years but under the new net assets standard which the Chancellor of the Exchequer introduced a week ago. The introduction of this standard was an enormous relief to local authorities and they will choose it. Under the net assets standard, as hon. Members know, they have their 8 per cent. exemption on their net assets either at the end of 1948 or at the end of 1951.
5.30 p.m.
In the case that I am considering, the case of the Bristol people, and in the cases of others similarly placed, naturally enough they will choose to be assessed on their net assets at the end of 1946, because their assets at that time were swollen by the assets of the electricity undertakings which were subsequently transferred. This means that they are to be assessed on the basis of a net asset which bears no relation to their actual net assets at the moment, because it includes electricity assets.
What happened when those undertakings were nationalised? So far as local authorities were concerned, no capital transactions took place. Undertakings did not sell their assets to the B.E.A.;

and they were then compensated in electricity stock. That did not happen in the case of the local authorities. All that happened was that certain severance payments were made which were nothing like the full net asset value of the undertaking—they were not intended to be—and also the B.E.A. took over the responsibility for the debt on the electricity undertaking.
In a case such as the one I am considering, which is not uncommon, where gross assets easily exceeded outstanding debt—in fact, in the case of Bristol, some £4 million—it means that the net assets of Bristol as calculated for E.P.L. purposes are to be £4 million larger than they are, or have been since 1st April, 1948. I may be making an error here, although I have thought a great deal about this, but, so far as I can see, it seems that Bristol is to be allowed 8 per cent. before becoming liable to E.P.L—to be allowed 8 per cent. of net assets worth £4 million.
This seems hard upon the Revenue. It means that net assets are being exempted twice over, once in the hands of the Bristol Corporation and once in the hands of B.E.A.; so whichever of the two possibilities is chosen in respect of electricity undertakings which have been transferred, one is grossly unfair to the transferor, and the other is grossly unfair to the Revenue. If that is the result of transfers in Clause 41, it seems to me to make this a more peculiar Bill than it has been described so far.
The thing is so complicated that one may always make a simple error about it, and there may be some reference to this in some obscure part of one of the Schedules that I have missed, but I think it is an important point, and it is certainly one on which I should be most grateful if the Financial Secretary would say something.
Let me revert, in conclusion, to what I began with, and that is the much wider point than that of these electricity undertakings. A very large number of transfers took place during these standard years, which were the years of the nationalisation of three of four of the country's most important industries. All those transfers are to be left outside the provisions of Clause 41. There must be a reason for this—there must be a motive; but the matter is quantitatively so important that I think it deserves a fairly


lengthy answer by the Government as to why this decision was taken.

Mr. Boyd-Carpenter: The hon. Member for Gloucestershire, South (Mr. Crosland) raised the general question as to the purposes and intent of the Clause and a specific question relating to the City of Bristol. Let me try to deal with those two matters in the same order as he did. First, the general issue. The hon. Gentleman pointed out, quite accurately, that the effect of this Clause is to take, in substance, the nationalised industries out of Clause 41 and apply a new procedure to the transfers on nationalisation to them of a very large number of private enterprises, and he asked why it was necessary to do it.
To some extent he himself gave the answer. The quantitative aspect of the matter is of very great practical importance. As the Committee will be aware, under ordinary transfers under Clause 41—normally speaking—the transferee takes the transferor's stance. There are qualifications, but that is the substance of the matter. If we were to seek to apply that, not to what I may describe as normal transfers, the ordinary sales of businesses which go on from day to day and year to year, but to the very large transfers that took place on nationalisation, we should get into very considerable practical difficulties.
For example, if we were to take the question of applying the standards of, in many cases, hundreds of enterprises, to bring them together and apply them to a standard on which to base the standard profits of a nationalised industry, that would involve, first of all, an enormous amount of work both for the Revenue and for the nationalised industry concerned; and it is a very complicated matter.
Let me give the Committee an example. I am speaking from memory, and the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), who has far more acquaintance with the subject than I have, will correct me if I am wrong, but I think I am right in saying that on nationalisation of the coal industry over 800 colliery companies were nationalised. The taking of their standards, and the factors peculiar to each one of those, and aggregating them, in order to provide the N.C.B. with a standard, would really be a very laborious process.
One need not go through in detail other nationalised industries, but, in general, a very large number of enterprises are involved. The hon. Gentleman was quite right when he stressed the importance which the sheer quantitative figure gave to this question. I agree with him. It is just the quantitative figure that makes it desirable, if we can, to simplify the basis in these cases.
I do not want to stress again, as 1 have several times, the desirability of maximum simplicity in the administration of this Tax; but, particularly where we are concerned with a tax which, it is hoped and believed, is not going to be a permanent part of our tax structure, it really is desirable that we should not load the Administration with undue burdens.
The reason—and I say this to the hon. Gentleman in answer to his question—for this separate treatment of the nationalised industries is that, as he will be aware, there exists already, for the purposes of the Profits Tax, a line of demarcation between that part of the compensation stock which relates to loan capital and that which relates to ordinary capital. That already exists for Profits Tax purposes.
Therefore, as the hon. Gentleman will appreciate, it is a great advantage, from the point of view of administrative simplicity, to take over those already ascertainable and those already ascertained facts and apply them to the administration of the tax. That is the reason for the different treatment of those industries.
Then as regards the Bristol case, of which, the hon. Gentleman recalls, he and I had some discussion a day or two ago. He, I think, had not had the opportunity to consider at that time what was the effect of my right hon. Friend's Amendments, and I did not anticipate that he would raise it, though notice had been given to me by the hon. Gentleman the Member for Bristol, South (Mr. Wilkins) that he would raise it on this Clause. I have really nothing to add to what I said then.
I think that the hon. Gentleman the Member for Gloucestershire, South is right in saying that if the Bristol Corporation, as I expect it will, takes advantage of the net assets standard of valuation of 31st December, 1946, it will come


off extremely well. But it is not for me —nor indeed, perhaps, for the hon. Gentleman—to give advice as to the best tax arrangements to be made by any particular taxpayer.
The problem arises, as the hon. Gentleman will himself appreciate, from the rather peculiar way in which compensation for electricity nationalisation was carried out. He has, in substance, correctly stated it. In the case of a local authority, though not in the case of an electricity company, of course, all that happened was that the British Electricity Authority took over outstanding debts and in many cases paid a certain sum by way of compensation for severance of the electricity enterprise from the other enterprises of the local authority. That was a method of compensation which was subject to certain criticism at the time, but that is neither here nor there.
The rather curious situation to which the hon. Gentleman has referred, quite rightly, I think, really arises from that method of compensation. If we took some other form of nationalisation where the compensation stock is supposed to be of the same capital value as the enterprise taken over and is, in fact, transferred to the person whose property is nationalised, no great difficulty arises, because the assets are valued as at 31st December. 1946, and although the asset that has been nationalised has gone, there is some other capital asset by way of compensation which, presumably, will be employed in some way.
I agree that in those cases where we are concerned with the curious consequences of arrangements made for compensation in respect of municipal undertakings, it looks as if the local authority concerned is getting an uncovenanted benefit in respect of E.P.L. The hon. Member for Gloucestershire, South will recall that on the last occasion we discussed this, I undertook that we would look into the matter. He very properly put it, that he did not wish Bristol either to be too fairly or too unfairly treated. That is equally our desire. We did undertake to look into the operation of the tax in this class of case, and no doubt it arises in the case of other municipalities which had the misfortune to have their electricity undertakings nationalised.

We want to look at that so that this tax may be as fair as possible. Obviously, it will be appreciated that since we had our last discussion there has not been time to do that thoroughly, but I am glad to repeat the assurance which I gave then that it is our intention to look into this matter to see whether this tax result is, first of all, so very peculiar, and, second, if it is, whether it is reasonable and practicable to adjust the tax provisions to take account of it.

Mr. Crosland: I am grateful to the Financial Secretary for his reply. I hope he will bear in mind that I am doing him a service in raising this matter, since it occurred to me that of this very large class of assets 8 per cent. were to be exempt altogether from E.P.L. liability. I urge him, however, not to look into this matter too hard.

Clause, as amended, ordered to stand part of the Bill.

Clause 50.—(BODIES CORPORATE WHOSE INCOME IS APPORTIONED FOR SURTAX PURPOSES.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. P. Roberts: There is an Amendment down to this Clause which has not been called and therefore I am not going to argue it. I wish to deal with the Clause as it now stands. There seems to be a certain amount of doubt and ambiguity about it. This Clause deals with companies which are director-controlled companies and not liable to Surtax under what I might call the Section 21 procedure.
I first of all wish to deal with the question of an investment company. An investment company pays out all of its income, and the Special Commissioners do not make an apportionment. It seems to me in that case that the company would become liable to E.P.L., and the first question I want to put to the Chancellor of the Exchequer, or whoever is to reply, is that there should be a general direction given to the Special Commissioners that where a company asks that an apportionment shall be made upon it, the Special Commissioners shall do so in order to give the benefit of exemption from E.P.L.


My second point is concerned with the trading company which equally pays out all its dividends but cannot be assessed for Surtax. The Special Commissioners have a period of six years before them, which means that such a company will not know whether or not there is to be apportionment. Therefore, as I understand it, this type of controlled company will not, in point of fact, know whether it will be liable or not for E.P.L. for six years, because it will have to wait up to that time before it knows if the Special Commissioners will make an apportionment.
My second question, therefore, is: If a company asks for a ruling by the Special Commissioners at the end of its tax year as to whether they will apportion or not this company, then the Special Commissioners will give an undertaking, and not say, "You must wait for six years before we make up our mind." If a company makes an application to the Special Commissioners to say, "Will you apportion us or not?", I am asking that they shall make a decision, whether it is a vesting company or a trading company. If the Government will give that undertaking, it will help many hundreds of small businesses and one-man businesses which, under this Clause, will be in some doubt as to whether they will be liable to E.P.L. or not, because they will have to wait for the Special Commissioners to decide, and that may take as long as six years.

5.45 p.m.

The Parliamentary Secretary to the Ministry of Civil Aviation (Mr. R. Maudling): This Clause deals with the so-called one-man companies which, in certain circumstances, are treated for Surtax purposes as if they were partnerships. In the case of the one-man investment company, its investment income is automatically apportioned to the members of the company and they are charged for Surtax as if they were partners on that part of its income. So far as any trading income that it may have is concerned, that is apportioned when, in the opinion of the Commissioners, the distribution has not been adequate.
In the case of the trading company, both the trading income and the investment income, if any, is apportioned when the distribution to the members has not been adequate. E.P.L., as the Committee is aware, is not charged on partnerships because partners are liable to Surtax.

The purpose of this Clause is really to provide in the case of these companies that either they are treated as companies and taxed as companies, in which case they will be liable to E.P.L., or their income is apportioned for Surtax purposes and the members of the companies are treated as partners and are liable to Surtax. but they will not pay E.P.L. in addition.
The hon. Member for Heeley (Mr. P. Roberts) raised some particular points. So far as the question of the six-year period is concerned, I would certainly be prepared to consider that and find out what in practice would arise. I do not think that in practice any great difficulty need arise in that particular case. So far as the principle of the Clause is concerned, it seems quite clear that there is no alternative either to treating these companies as companies and taxing them throughout as companies, or treating them throughout as partners, and thereby rendering their members liable to Surtax but not to E.P.L.

Mr. P. Roberts: I am obliged to my hon. Friend for saying that he will look at this matter. I am not dealing with the merits of the particular Clause; all I am saying is that there will be great difficulty if the Special Commissioners wait for six years before they make up their minds, and I am much obliged to my hon. Friend for saying that he will consider this matter.

Sir F. Soskice: I think that there is some substance in what the hon. Member for Heeley (Mr. P. Roberts) has just said. I should have thought that there was a real difficulty in the point which he raised. We get an E.P.L. assessment put on a company, and two, three, four or five years later we get an apportionment on the same company. I hope that the hon. Gentleman will consider that very carefully. Unless I have misread the Clause, I should have thought that the effect may be that we may have two assessments—one for E.P.L. in the first two or three years, and, in a later year, an apportionment which in effect charges the same company to two taxes.

Mr. Maudling: That is a point of substance, and we will look into it to see that the liability of double taxation will not in fact arise.

Clause ordered to stand part of the Bill.

Clause 51.—(PARTNERSHIPS.)

Major Guy Lloyd: I beg to move, in page 56, line 8, at the end, to add:
Provided that—

(a) where a change occurs in the partnership in such circumstances that thereafter a body corporate, which until that time was engaged in the trade or business as a partner therein, continues to be engaged therein but on its own account alone, the share of that body corporate in the profits and losses of the trade or business arising at any time before the end of the standard period shall be deemed to be the whole amount of the profits or losses of the trade or business arising during that period; and
(b) where a change has taken place at any time after the beginning of a standard period in the proportion in which the profits are to be divided between the partners, the share of the body corporate in the profits and losses arising before the end of the standard period shall be computed by reference to the proportion in which it is entitled to share in the profits during the chargeable accounting period.


The object of the Amendment is to give the Government an opportunity to rectify one of the many anomalies—some of them small, but all of them real—and injustices which may have been overlooked when the Bill was drafted. On Clause 41 we pointed out a number of very similar anomalies, and some of our Amendments were accepted.
Here is another in connection with a partnership. I hope the Chancellor and his advisers will see their way to rectify the anomaly by conceding my point. Admittedly, the words I suggest in my Amendment are rather complicated, but they could doubtless be improved, and I should be more than willing to yield to the Chancellor and his advisers the opportunity of improving the words provided they accept the principle of my Amendment.
Under the Clause as drafted a change in partnership means that the surviving partners can succeed only in proportion to the share of the profits previously accruing to them. That is not right. If a man retires from a partnership with a firm, why should the firm suffer through that because their share is based on the standard of profits of the standard year although it is exactly the same business as it was? Indeed, it may now even be making a loss after the retirement of the other partner, but although there might be a fall in the profits the Excess Profits Levy would still have to be paid. That is

a grotesque state of affairs, as I am sure my right hon. Friend will agree.

Mr. Maudling: The Clause deals with the position of a business being carried on by two or more persons in partnership when one of the partners is a body corporate. My hon. and gallant Friend has pointed out that there may have been a change of circumstances since the end of the standard period. For example, a company may become entitled to two-thirds of the profits of the business instead of one-half. My right hon. Friend the Chancellor of the Exchequer considers that the substance of the Amendment is valid and that there should clearly be an adjustment of the company's standard profit in those circumstances to reflect the change that has taken place in the circumstances of the partnership.
The wording of the Amendment is not entirely suitable. There may be cases where a company has paid away a large sum to the outgoing partner, and it would not be fair to ignore the fact that the company's funds had thereby been reduced. However, I can give my hon. and gallant Friend an assurance that if he will withdraw the Amendment the Chancellor will put down an Amendment on the Report stage to cover the point and to cover the case, which also needs to be covered, where there has been an introduction of a new partner.

Major Lloyd: I am very grateful to my hon. Friend for those remarks. I am very glad that the wording should be in accordance with the Chancellor's wishes and not mine. I am delighted to think that the Chancellor has conceded the point because after all it merely reverts to the position under the Excess Profits Tax during the war. I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clause 52.—(LIQUIDATORS, RECEIVER SHIPS, ETC.)

Mr. Maudling: I beg to move, in page 56, line 19, to leave out subsection (2).
This is consequential to the Amendment to Clause 36, in page 43, which deleted lines 26 to 30.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 53.—(ASSESSMENT AND COLLECTION, ETC.)

Mr. Roy Jenkins: I beg to move, in page 56, line 37, at the end, to insert:
with the substitution for the words three per cent. where they occur in section eight of the Finance (No. 2) Act, 1947, of the words six per cent.
All the speeches which have been made and all the Amendments which have been moved by the Opposition have been designed to help the Chancellor of the Exchequer, but that is more manifest in the case of this Amendment than in the case of some others. The Amendment is designed to do two things, both of which should be extremely helpful to the Chancellor. It is designed, first, to enable him to get a small amount of extra revenue in certain circumstances and, second, to extend the general provisions of his financial policy to a field to which they might not otherwise extend.
We propose in the Amendment to relate the rate of interest paid on arrears of tax to the prevailing Bank rate. The idea of charging interest on arrears of tax was first brought into operation in the Finance (No. 2) Act, 1947, which arose out of the Autumn Budget of my right hon. Friend the Member for Bishop Auckland (Mr. Dalton). The rate of interest then proposed to be charged on arrears of tax was 3 per cent. The Clause as drafted proposes to continue to charge 3 per cent. on arrears of the Excess Profits Levy. We are proposing to raise that to 6 per cent.
We propose to do that for these reasons. Obviously, a very great change has come over the monetary climate since the autumn of 1947. It is not my purpose now to argue whether that change is a right change—some of us had very grave reservations about it—but it is nonetheless clear that a change has occurred. When the 1947 Budget was introduced we were perhaps not quite in the heyday of cheap money, but at any rate my right hon. Friend the Member for Bishop Auckland was still Chancellor of the Exchequer and we were pretty near the heyday. We had a Bank rate of 2 per cent., and it was, therefore, reasonable to introduce a rate of only 3 per cent. on tax arrears.
We have moved a long way since then. We have a Bank rate of 4 per cent.

There can be no doubt in the minds of any hon. Members who have listened to the Budget speech or the general economic speeches which the Chancellor has delivered since he took office that he regards as an absolutely essential feature of his financial policy the stiffening of credit rates. If there was something in the Budget which gave it any claim to be called an emergency Budget dealing with the balance of payments crisis it was the stiffening of the Bank rate.
Arguments were advanced by the Chancellor, and even more so by the Secretary of State for the Colonies in a speech which he made at the time, about the beneficial effects which would flow to the economy of the country by this stiffening of credit terms, an absolutely essential feature of the country's economic policy. While we cannot agree with the Chancellor, and still less with the Secretary of State for the Colonies, we feel that this credit policy is a wise policy, and while we certainly cannot agree that it is producing the results which hon. Gentlemen opposite claim, we feel that if it is the policy of the Government it ought to be applied consistently and that people who do not pay the tax which they ought to pay ought not to be granted a special exemption from its operation.
What is the position about arrears of tax? To a company arrears of tax are a loan from the Government during the period in which the tax is not paid; it is a loan which the company is able to use for its own business in a great many ways. Yet this Government which believes in dear money is saying that the rate of interest on these loans which it will make to taxpayers who are dilatory in meeting their dues should be charged only at 3 per cent., the old cheap money rate, whereas local authorities who borrow from the Public Works Loan Board and others who have to get money for various purposes have to pay a very much higher rate because of the policy which the Government itself has put forward. We say that if that is so, it is highly desirable that the policy of dear money should be extended to cover people who are very slow in paying their arrears.
6.0 p.m.
I cannot believe that the Government will not accept this Amendment, because it is an Amendment manifestly designed


to help them in their purpose, which is to get more revenue from a source which no one will object, and to help them to carry out the central design of their economic policy. I am encouraged by the fact that it appears that the Financial Secretary is about to reply. That means that it is just possible that we may have some help from him on the first occasion, whereas if the Solicitor-General replies we know that we would have to wait at least until he made his fourth appearance at the Despatch Box before getting any glimpse of a concession. Judging by the anticipatory movements of the Financial Secretary, I think we can assume that he is going to reply, and I hope he will accept what I submit is a reasonable Amendment, and a most helpful Amendment from the point of view of hon. Members opposite.

Mr. Fletcher-Cooke: On a point of order. I am not experienced in these matters, but I understood it was not competent for a Private Member to move an Amendment which would increase the burden on the taxpayer. I gathered that that was a well-established constitutional principle, and I should like to know how it comes about that this Amendment is in order when undoubtedly it increases the burden on the taxpayer. It may be an impertinent question, but I should like to have your guidance, Mr. Bowles, for my future guidance.

Mr. Jenkins: I am sure it will be clear to the hon. Member, if he listened to my speech, that this Amendment does not increase the burden on the taxpayer but on the person who does not pay his tax.

The Temporary Chairman: I think the Amendment is in order, and it has been selected.

Mr. Boyd-Carpenter: The purpose of this Amendment is to impose an additional burden on the dilatory taxpayer and to raise the rate of interest on E.P.L. arrears from 3 per cent. to 6 per cent. I ought to remind the Committee that 3 per cent. is the rate laid down at present under the Act of 1947 for Income Tax, Profits Tax. Surtax and old E.P.T. arrears. Therefore, the first consequence of paying 6 per cent., as is suggested in the Amendment, would be to introduce a disparity between the rate for the arrears

of other taxes and the rate for arrears on this Levy. That is a point of some importance.
The real essence of the matter is this. The hon. Member for Stechford (Mr. Roy Jenkins), in his very entertaining speech which he assured us was intended to be helpful—and I accept what he said—ignored one thing. He ignored that the 3 per cent. at present imposed is a net rate. It is not deductable for the purposes of the other taxes, and it is in substance, therefore, equivalent to a gross rate of 6 per cent. I do not think that the hon. Member fully appreciated that.
It equally falls as a matter of elementary mathematics, which I hope the Committee will forgive me for imposing on them, that the 6 per cent. net rate would be equivalent to a 12 per cent. gross rate. I have no sympathy with the persons who deliberately delay payment of taxes due. However, there must be a certain degree of reason in the penalties imposed, and a gross rate of 6 per cent. is a pretty substantial deterrent.
Perhaps I might carry the matter still further by saying that if the penalties imposed in this respect are wider they might come to an extortionate amount and it would be a very great incentive to avoid the payment by taking certain other steps. It would be very unwise to raise the percentage higher than at present. If we did I do not believe that we would increase the real stimulus to pay taxes. I believe, on the other hand, we would be introducing a penalty so out of line with what ordinary people think reasonable that we would be defeating the very ends we have in view. While fully appreciating the spirit in which this Amendment was moved, I am afraid that it does not seem proper to accept it.

Mr. Crosland: This is the most disappointing and surprising reply that we have got during today's discussions. I thought from the Financial Secretary's bearing before he got up that he was going to make some concession to our views, but this completely dogmatic refusal to recognise anything in our case has come as a great disappointment to hon. Members on both sides of the Committee, and a much greater disappointment to hon. Members opposite because it is not we but they who have this mystique about the Bank rate.

Mr. Ian Horobin: Mistake?

Mr. Crosland: The hon. Member for Oldham, East (Mr. Horobin) has entertained the Committee on a number of times during the course of this Finance Bill, but I never heard such eloquence from him as we heard during the Budget debate at 9.30 one night, when I was alarmed for his general mental stability, considering the rate at which he was going. The whole of his speech then, and it was extremely eloquent, finely phrased and held the attention of the House, though it was not without interruption, was a passionate advocacy of the influence of the rate of interest on people's behaviour.
On that occasion the hon. Member passionately advocated the use of this powerful financial weapon to deter people from doing the things which they wanted to do, and in particular from investing too much. It is true that during the whole of the Committee stage he had said exactly the opposite., the trouble being that we were deterring people too much from investing. The object of this Amendment is to do what the hon. Member advocated on that occasion. Does he want to deter people from paying their taxes? He has got this wonderful weapon, which is powerful and flexible, and by the use of it people who are unwilling to pay their taxes can be made to do so, but apparently the hon. Member wants to deter people from paying those taxes.

Mr. Horobin: Is the hon. Gentleman asking for a Bank rate of 12 per cent.? Surely that is too much of a good thing?

Mr. Crosland: It is not a question of being too much of a good thing. All we are asking is that the rate of interest on the arrears of taxes, which previously bore some relation to the Bank rate, should now bear some relation to the Bank rate in operation at present.
I should like to deal with one or two points which were mentioned by the Financial Secretary in refusing to accept this Amendment. He first of all dealt in his all too brief answer with the question of disparity between the rate of interest for arrears of this Levy and that on the arrears for Income Tax, Surtax, Profits Tax and the old E.P.T. It is perfectly true, as the hon. Member said,

that this Amendment will introduce a disparity, but on this side of the Committee we have only started our campaign to enable hon. Members opposite to bring their own economic policy into effect. Later we shall take steps to bring the rate of interest on other arrears into line with this.
In any event, even if there is a disparity, what follows? The Chancellor, when he defended the principle of the E.P.L. in one of our debates last week, went into a moral denunciation of rearmament profits. It was a denunciation with which Members in all parts of the Committee were extremely sympathetic. He made the case that in contrast to Income Tax and the Profits Tax this was a levy which was essentially a moral one. If that is so, it surely follows that there is a strong moral case for penalising those people who will not pay this levy more than the laggard in Income Tax or Profits Tax. I am not at all worried at the fact that there will be the disparity to which the Financial Secretary made reference for this particular reason.
The Financial Secretary also made reference to the fact that the rate of interest was net and if there is a gross rate we get about double the figure. For a large number of borrowers the rates of interest are gradually moving in such a direction that before long they will be effectively paying twice as much as a few years ago. Why should not this doubling apply to interest on tax arrears?
Consider the sort of people who will have large liability for the levy. We shall not be dealing with poor, impoverished citizens with no resources, but with powerful companies with plenty of financial resources. One cannot commiserate with them as though it were a matter of sympathy with people who were going to be plunged into difficulties by paying 6 per cent. net on their tax arrears. The burden on these companies will be nothing approaching the burdens on a great number of people up and down the country who will have to pay higher rates of interest. If we ask ourselves what the effect of the new monetary policy will be on different groups of people, and which group of people is most hard hit, we could never say it consisted of the companies liable to E.P.L. and who were somewhat behind with their payments.
I do not think that the arguments used by the Financial Secretary were convincing. Certainly they do not satisfy us on this side of the Committee. He has had a few minutes to think about the matter whilst I have been talking, so I appeal to him not to close his mind on this subject but to recognise that there is a serious element of injustice to be put right. There would be something slightly nauseating in putting up rates of interest for people who have to borrow money, while exempting other people who were behind in their E.P.L. payments. That is the case for this Amendment.

Mr. Callaghan: I was hoping for some further speech from the Financial Secretary. He was so ready to get in in the first place that I am surprised, after the powerful speech of my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), that we are not to hear from him. It is clear that all he has done so far is to read the Treasury brief. In the Treasury are a good many civil servants who understand these matters very well, but they are not always fully in tune with the Government's economic policy. They cannot keep up with it as fast as the Minister of State for Economic Affairs does, for example.
It is clear also that on this matter the Treasury pundits do not understand what the Government are trying to do. The Government have told us that it is their intention that monetary rates should be stiffened in such a way that all unessential capital investment is cut out and that people should not do work unless it is vitally essential and they can afford to do it.
I want to direct a question to the Financial Secretary. Let us take the case of a company which has considerable Excess Profits Levy liability. It may have money in the bank waiting to pay the levy but it is short of ready cash for the moment for financing a particular project. Perhaps the company have got past the controls and want to build a new factory. What is to deter that company from doing a little arithmetic and saying, We have £100,000 owing on Excess Profits and we are intending to pay it, but if we hang on we shall only have to pay 3 per cent. arrears on the interest. If we go to the bank for financial accommodation we shall pay 5 or 6 per cent."?

Mr. Sydney Silverman (Nelson and Colne): Does my hon. Friend remember that when the original interest was put on, the argument advanced in favour of so doing was precisely that which he is advancing now? It was that unless we had power to add interest to a post-dated payment of tax there was every inducement to large Income Tax payers to withhold payments about which there was no shadow of doubt because they could earn a substantial amount of interest during that period. It therefore paid them not to pay until later. If we do not pass the Amendment or something like it we shall really restore the status quo and be offering people interest for not paying their taxes.

6.15 p.m.

Mr. Callaghan: I am very much obliged to my hon. Friend. I was producing, cautiously and in an interrogatory way, an argument, to see whether it would stand up to examination. My hon. Friend's recollection seems to be as good as my reasoning power. I think we are both right. Unless the Financial Secretary alters the rate of interest that has apparently stood in successive Finance Acts since 1947, he gives an incentive to large companies with considerable E.P.L. liability not to discharge that liability but to finance projects out of money that ought to be going into the Treasury.
My hon. Friends the Members for Gloucestershire, South and Stechford (Mr. Roy Jenkins) seem to retain some illusions about the Government. They seemed surprised that the Government should at the same time try to deter local authorities from building houses by higher rates of interest, and not want to deter companies from using money for financing profitable enterprises instead of using it to pay their Excess Profits Levy.
The Government are running true to form. They do not mind if large companies get away with their excess profits for some time by financing enterprises out of money that ought to be paid over to the Exchequer. If they do mind it, they had better accept the Amendment. The Government cannot resist the conclusion that they are prepared to allow these companies finance at a lower rate than the market rate of interest. [Interruption.] Does the hon. Member wish to interrupt me?

Mr. Horobin: The point is clear, and has already been made. We can deduct the normal interest charges, but this charge is not deductible. It is already and effectively a 6 per cent. rate, or 2 per cent. upon the tax rate. Nobody wants to encourage people not to pay taxes, but whatever can be done about it is already being done. The proposed 12 per cent. is so punitive that it will have all kinds of undesirable consequences.
As I have been dragged to my feet I might point out that the Government sometimes hold large sums of our money and do not pay. I can think of one claim well known to myself that has been outstanding since 1942, and I wish they would pay me 6 per cent. on it.

Mr. Callaghan: The hon. Gentleman had better address those remarks to the Financial Secretary and not to me. In 1942 there was a Coalition Government and a Conservative Chancellor of the Exchequer.
I think I have made the point clear, which is that it is obviously more worth while for a company to retain the levy and use it, rather than to borrow money from the bank at 5 per cent. [HON. MEMBERS: "No."] Even if that is wrong, which I do not accept merely because hon. Gentlemen opposite interrupt me, why is it that a rate of interest which stood at 3 per cent. in 1947 when the rate for borrowing was somewhere around that figure, should remain the rate today when the rate of borrowing has increased so much? [HON. MEMBERS: "Wrong again."] In that case no doubt we shall have a crushing reply from the Financial Secretary in due course.
Is it denied that the rates of interest have moved up over the last few years? I thought the burden of the Government case was that rates of interest bad moved up and that it costs more to borrow than it did. In that case it must be more worth while for companies to retain in their own hands money which they ought to be paying over in taxation and using those resources to finance their own enterprises.
I say in conclusion to the Government that they ought to accept this Amendment. If they do not, it will be seen that they are prepared to impose lighter penalties upon their friends than they are upon

other organisations which have to borrow in the market. It will be seen quite clearly that they are ready for their friends to evade payment in order to line their own pockets. I really do not mind if the rate of interest goes up to 12 per cent. The hon. Gentleman ought not to mind either. These people ought to pay this rate of interest on these unpaid amounts. They are only being asked to pay tax on sums they have already had—

Mr. Godfrey Nicholson: Let us have the death penalty straight away.

Mr. Callaghan: The hon. Gentleman may be speaking for himself; I do not think he is speaking for anybody else. We are asking that firms who have made excessive profits, who are due to pay the levy, should pay it on time. If they do not, there should be a substantial penalty for not doing so.

Mr. S. Silverman: At least they should not profit by it.

Mr. Callaghan: No, they should not profit by it. I see that the Financial Secretary, having been recumbent, has stirred into some activity. I hope he will not disappoint me and that we shall get some real reasons why he should not accept this Amendment. In the hope of doing so, I will now resume my seat.

Mr. Boyd-Carpenter: I am sorry that the hon. Member for Cardiff, South-East (Mr. Callaghan) introduced the element of there being any desire to shelter the friends of anybody from the payment of tax due. The hon. Gentleman knows perfectly well that in the imposition of this or any tax we all regard it as fundamental that the officers of the State must do their duty and enforce equal, full and as prompt payment as possible of this and of all taxes. The hon. Gentleman, from his own honourable experience at the Inland Revenue, knows that perfectly well.
The purely practical point with which we are concerned is whether there is any reality in the rather mediaeval approach of the hon. Gentleman, that we must step up the penalties because we fear an offence may be committed. Let me deal first with the suggestion that there was nothing to deter a company, which was due to pay the tax and had the money


available, from simply retaining it. The hon. Gentleman knows that apart from interest rates there is the formidable Section by which, where tax is due, the Inland Revenue have the right to take the person concerned before the courts on a debt due to the Crown and, if the facts are as stated, they will no doubt get an order for the payment with, in addition, the costs of the Crown in the proceedings.
The hon. Gentleman knows that the Inland Revenue is a machine well experienced in these matters. Indeed, there have no doubt been occasions when certain members of the public wished that the Inland Revenue had not quite that efficiency in their own case.

Mr. Callaghan: As the hon. Gentleman has referred to my own administrative experience, let me say that it is my administrative experience that the most difficult thing in the world in the Inland Revenue Department is to get the Board of Inland Revenue to take proceedings against anybody. It is the most slow moving and cumbrous machine that I have ever come across. Every local inspector of taxes has had the dreadful experience of trying to get them to move more quickly against people who have been getting away with no payment.

Mr. Boyd-Carpenter: The experience of the hon. Gentleman must be a little out of date. Obviously, in a great administrative machine there is sometimes a case that an official thinks should be at the front of the queue whereas his seniors take the other view. May be the hon. Gentleman has had that experience. The point is that it is not merely the rate of interest, it is the fact that legal proceedings can be taken for the enforcement of these debts.

Mr. Mitchison: Am I not right in thinking that, if the action is taken, and a judgment debt is established, the rate of interest paid on the judgment debt is higher than is provided for here?

Mr. Boyd-Carpenter: I understand in certain cases that is so.

Mr. Mitchison: All cases.

Mr. Boyd-Carpenter: I am advised in certain cases, but if any hon. Member wants to pursue that side issue, my hon.

and learned Friend will deal with it. However, it does not affect the central issue.
I ask the Committee to consider a further point. I thought it was an out-of-date idea in this country that by increasing the penalty one automatically ensured better enforcement. That is a line of argument which, not unnaturally, induced the interruption of my hon. Friend the Member for Farnham (Mr. Nicholson). The practical point is this: we have here the equivalent of a rate of 6 per cent. That is a substantial amount. As my hon. Friend the Member for Oldham, East (Mr. Horobin) has pointed out, if one goes to the market and borrows at 4 per cent., that is deductible from tax. This is not. This is equivalent already to a rate of 6 per cent., and it is a substantial amount.
Let us follow it a little further. Suppose it were doubled, making it 12 per cent. as this Amendment suggests. It would give those liable to it a considerable incentive to take the step which enables them to stop the running of interest —entering an appeal. The costs of entering an appeal will probably deter them from doing it frivolously, but if we push the rate of interest to this level, we shall give them a big incentive to do that.
Therefore, I ask hon. Members to appreciate my arguments. We are at one in our desire and determination to use the machinery of the Inland Revenue to secure that this tax, as all other taxes, is punctually collected. However, we do not consider that to pass from a rate of interest already substantial to one so severely penal in its incidence, as is suggested, is the right way to tackle this.
That is the difference between us. I am quite sure that hon. Members appreciate there is not the slightest desire to do anything but to collect the Revenue as quickly as is physically possible. It is not perhaps a very great issue and the Committee has a good deal of other business before it this evening. I hope, therefore, the hon. Gentleman will understand when I say that we cannot, ad hoc and in this way, import what seems a wholly disproportionate rate of penalty into the administration of tax law. That is a serious matter.
We shall, of course, watch the collection of this tax, and if it seems to us that the tax is coming in badly and that an


adjustment of the interest rates—probably not as great as this—would be of assistance in collecting it, we shall not hesitate to come to Parliament and seek powers so to do.
6.30 p.m.
Our present view is that however well-intentioned this proposal may be, it would not help in the object that Members on both sides of the Committee desire; that on the contrary, by going beyond what ordinary people would regard as reasonable, it would introduce some difficulty into the working of the tax machinery. I am sorry if the hon. Member thought my first speech was too brief —that is not normally the criticism to which I am subjected in the Committee—and I hope I have redeemed that in the course of this speech; but we do not feel at this stage that the case is made out for so large an increase in this particular interest rate in respect of this particular tax.
As I have said, however, we shall watch the position. We are as anxious as are hon. Members to secure collection of the taxes, and if it seems to us that some adjustment of the rate of interest, which, it has, quite rightly, been pointed out, was fixed as long ago as 1947, is necessary, we shall not hesitate to come to Parliament; but almost certainly we would do so in respect of the whole wide body of taxes and not of this particular one.

Mr. S. Silverman: I think that the case was put forward admirably and completely, and I do not say that the hon. Gentleman has not offered a reasonable and considered argument on the other side. All that I rise for is to point out that his argument does not answer the case that was put forward, and is based on a fallacy.
The hon. Gentleman's argument assumed that he was being asked to increase the penalty, and he put forward an elaborate argument, which, I think, all of us would accept, to the effect that one does not reduce crime always by increasing penalties—nobody denies that. The whole point of the Amendment, however, was that we were not increasing penalties. On the contrary, the Government's financial policy, which is not being debated on the merits now, has been to raise the Bank rate, and to raise it considerably.
Therefore, unless we do something of the nature that is contemplated by the Amendment, we are either reducing or abolishing the penalty altogether. Either we are giving the dilatory taxpayer an actual profit on his delay, or, if in some cases we are not quite doing that, at any rate we are making the cost of delay in relation to the cost of money less than it was when the interest was first made collectible in this way.
The whole of the hon. Gentleman's argument rested on that fallacy—that what he was being asked to do was to increase the penalty; and since he is not being asked to increase the penalty at all, his argument has gone and the arguments that were put before him hold good.

Mr. Roy Jenkins: The attitude of the hon. Gentleman has been most disappointing and unsatisfactory. He finished by saying that this was a small matter and that the Committee wanted to get on and make progress. If the hon. Gentleman really wants to get on and make progress, the right way to do it is to accept reasonable Amendments and not merely to give little lectures to the Committee. The hon. Gentleman is catching from his hon. and learned Friend the Solicitor-General the bad habit of having to make several speeches because his first speech is so unsatisfactory, and the bad habit of putting forward contradictory arguments in those several speeches.
The hon. Gentleman's first great argument was that this proposal was not necessary because already the rate of interest was prohibitive; that it was already equivalent to a gross rate of 6 per cent., and that that was quite enough. By the time he got to his second speech, he had changed round on that point and said that he was very much against having a prohibitive rate of tax and that he depended much more on the fact that the taxpayer could be taken to court and be made to pay rather than have any prohibitive penalty, which, I think, he said was an archaic way of going about it.
Our whole case is this. Three per cent. was, apparently, right in 1947. Hon. Members opposite did not vote against it. There were several Divisions on the corresponding Clause in that 1947 Bill, but, that was not a point on which hon. Gentlemen chose to oppose. Presumably, therefore, they too thought that 3 per cent. was right in 1947. If it was an


effective deterrent then it cannot possibly be an equally effective deterrent in the conditions of today.
If hon. Members opposite believe in having—if they do not believe in it, why are they putting it on?—a deterrent rate of interest on E.P.L. which is not paid, then let us have an effective deterrent. If 3 per cent. was effective in 1947, it cannot possibly be effective today. Hon. Members have said that 12 per cent. was quite out of all reason. After all, under the Bill, we are giving 12 per cent. increase in standard for new capital which is subscribed. I do not see the great difference between that and imposing a gross rate of 12 per cent. on people who deliberately do not pay their tax. In neither of his speeches did the Financial Secretary give any argument whatever which could be accepted as being an answer to the case.
The Amendment is a genuine attempt to help the Chancellor to carry out a main design of his financial policy. I am sorry that the Financial Secretary either has so little faith in his right hon. Friend's monetary policy, or is so hidebound by the brief of his Department, that he cannot be a little more helpful.

Mr. Jay: I accept the Financial Secretary's assurance that this is not a matter of giving special benefits to the friends of one side of the Committee or another, but he really has not answered the logic of the arguments of my hon. Friends.
The hon. Gentleman has adduced only two real arguments. The first was that the rate of interest was 3 per cent. in relation to the arrears on Income Tax and, I think, on Profits Tax and that, therefore, it ought to be the same in relation to E.P.L. My hon. Friend acknowledged that at once when he said that we were only too willing to see a uniform rate of 6 per cent. throughout.
Secondly, the hon. Gentleman argued that 3 per cent. was quite sufficient because it is 3 per cent. net and, therefore, 6 per cent. gross. But that has no substance, as my hon. Friend has pointed out, because the rate stood at 3 per cent. net and 6 per cent. gross before the Bank rate was increased by the Government last November and again in the spring. The Bank rate has been more than

doubled since this rate stood at 3 per cent. last winter. Therefore, it cannot possibly be the appropriate rate now.
After all, at the rates of gilt-edged prices to which the Government have succeeded in depreciating the national credit in the last few weeks, one can today earn a very great deal higher yield by investing surplus money in gilt-edged or, indeed, in many other things than was the case last autumn. Therefore, the incentive to do so is much greater, and, therefore, the deterrent which was right in comparison with the gilt-edged yields of last autumn cannot possibly be right with the gilt-edged yields of today.
This is our real complaint on the Amendment. Why do the Government apply one principle to the local authorities for housing and other purposes, and another principle to these, I do not say tax evaders, but dilatory taxpayers? After all, we maintained a rate of 3 per cent. on public works loans. The Government then came along last autumn and said, "Why 3 per cent.? Gilt-edged yields have gone up and, therefore, the 3 per cent. on public works loans ought to go up also."
If that argument was sound for public works loans, it must also be sound for the 3 per cent. deterrent to the dilatory taxpayer. We also ask why the rate should remain at 3 per cent. when, on the Government's own admission about public works loans, they have put that rate up. It seems to be one law for the dilatory taxpayer and another for the local authority.
Does the Government's attitude on the Amendment mean that they do not have the courage of their convictions in their dear money policy? Are they now showing the first signs of abandoning that policy? I think that we ought to know. A great deal of uncertainty already has been caused in the last week or two by the Government's change of mind and vacillations over the E.P.L. We have seen all sorts of movements of prices, and so on, in the City in the last week or two.
If doubt is to be cast on the Government's courage in maintaining their dear money policy, a great deal more uncertainty will be created, and we ought to know where we are. Of course; it is all very well. We raise the Bank rate and we raise it again in order to produce certain


effects. The effect is produced for a few weeks and then begins to wear off, and people naturally say, "Is the Bank rate to be raised further? "On the evidence of their attitude to this Amendment I think many people may be beginning to doubt whether the Government will have the courage to go further with that policy at all.
The right thing on this Amendment would have been to have had a considered pronouncement about interest rate policy from the Minister of State for Economic Affairs. It was he, we remember, who conducted the debate on this subject before Christmas at considerable length. He is obviously the Government expert

on the subject of interest rate policy and one would have expected to see him present to answer the debate this afternoon.

In the absence of any such statement, which we would all like to have heard, and in protest against the decision of the Government to apply quite a different principle to dilatory taxpayers from that which they are applying to local authorities, I must advise my hon. Friends to press this Amendment to a Division.

Question put, "That those words be there inserted."

The Committee divided: Ayes, 199; Noes, 216.

Clause ordered to stand part of the Bill.

Clause 29.—(RELATION OF PROFITS TAX TO INCOME TAX, RATES OF PROFITS TAX, ETC.)

Mr. R. A. Butler: I beg to move, in page 32, line 26, to leave out "seventeen," and to insert "twenty-two."
It might be for the general convenience of the Committee if we had a general discussion on this Clause, since all the Amendments relate to either the raising or lowering of the Profits Tax and I think the issue is the same. I am in the hands of the Committee, however, and I might add that in the end it will come to much the same thing.
For instance, my hon. Friend the Member for Farnham (Mr. Nicholson) has an Amendment which raises the possibility of lowering the tax on undistributed profits—that is, profits put to reserve. I should in any case be mentioning that matter, and I do not think he would be inconvenienced if we discussed this generally, because he will be able to put his point and either I or one of the other Ministers concerned will answer the debate. I trust that what I have suggested will not preclude any Member of the


Opposition putting the matter to the vote on any of their Amendments, for that can be done.

The Temporary Chairman (Mr. Frank Bowles): The only Amendments that have been selected on Clause 29 are those in the name of the Chancellor of the Exchequer. Those in the names of Members of the Opposition have not been selected.

Mr. Butler: I have foreseen the wisdom of the way in which the affairs of this Committee are conducted to give an opportunity to hon. Members to express their opinion.
The object of this Amendment and that to line 28, follows on my decision to make certain amendments to the Excess Profits Levy. I decided that it was necessary in certain circumstances to restore the rate of Profits Tax to 22½ per cent. in order to deal with the problem involved for the Exchequer as a result of the Amendments made in the Excess Profits Levy. That means that the Profits Tax, although considerably below what it was under the late administration, will now stand at a level of 22½ per cent. on distributed profits; on the other hand, the level on undistributed profits will be 2½ per cent., which is half the level under the previous administration. That in itself is an indication of the attitude of the Government to the burden of the Profits Tax both on distributed and undistributed profits.
In the case of undistributed profits the tax is now only half of what it was under the late administration, and that points to our belief that it is important that profits should be put to reserve to give industries an opportunity to face the real difficulties with which they are confronted. I should now like to acknowledge the difficulties which they have to undergo when facing the matter of replacement and other problems today.
The tax would be at the rate of 22½ per cent. on distributed profits as against 26¼ per cent., which in itself is a reduction. I hope hon. Members and those outside the Committee will observe this. This means that the tax on distributed profits will be at a fairly high level, and to that extent will, in the event of distribution of dividends, affect the policy in that direction.
In all sincerity I think that this is the best course to take considering the position with which we are faced at the present time. I shall give before I conclude the general balance-sheet of these operations even though I have given it previously. The position is that we have now an additional burden on industry of some £80 million compared with approximately £100 million which I stated in my Budget speech.
9.30 p.m.
The rates of Profits Tax have been reduced by nearly £70 million, and by the reliefs the general level of the E.P.L. has been reduced from about £200 million to £140 million. The general balance-sheet therefore works out at £80 million, which will come into the Revenue next year. We are not dealing with this year's Revenue but with next year's. This is a general arrangement which is, at any rate, conceived in equity. I do not think, in face of the national position. I could have taken any other decision.
Originally, when the Excess Profits Levy was drafted, I coupled with it a proposal for a reduction in the Profits Tax rates. I cannot possibly commit this Government or any other Government about what will happen when the Excess Profits Levy is ended. I have already indicated to the Committee that it is not proposed that this shall be a permanent tax. It should be a clear indication to industry that when the Excess Profits Levy is removed, at such a date as is suitable, consistent with the reasons and motives which prompted its introduction—that is to say, it was to be related to the injection of re-armament into our economy—there will be a Profits Tax level which I hope will not be an undue burden on industry.
It should give some indication to my hon. Friends on this side of the Committee, to hon. Gentlemen on that side of the Committee who are interested in the burdens of taxation on industry, and to people outside, that we sincerely understand this problem and that we believe that the needs of production are of paramount importance to the country and to any Government. We could not possibly subscribe to the view that company taxation should be continued indefinitely at its present level. That must be a


constant preoccupation of anybody holding the high office which I do.
I had to consider Revenue considerations in deciding the extent to which a reduction in Profits Tax could be made. I have given the Committee already the general sum which was involved in my calculations. The Committee have now run through the general rate and nature of the tax, with the exception of the new Clauses on the Excess Profits Levy. They will therefore see that the Amendments which I am moving will not take back the total relief which has been given under the legitimate Amendments relating to Excess Profits Levy. At the same time it gives to the Revenue a certainty in the coming year.
My hon. Friend the Member for Farnham has on the Order Paper an Amendment for the complete abolition of the tax on undistributed profits. While it was in our election address and also in our manifesto that it would be a very good thing to reduce taxation on profits ploughed back into industry, I must tell my hon. Friend that a concession for the abolition of the remaining 2½ per cent. would work out at some £50 million, which it would be impossible for me to consider in the present national situation. I feel sure he will agree, now we are on his side, in his desire to reduce the burden on undistributed profits, that a bill of such a nature would be too much for us to contemplate at the present time.

Mr. Horobin: Would not the £50 million come into next year and not into the present year?

Mr. Butler: Yes, as I have already indicated, the position is related to next year because of the period which has to elapse before the computation of the tax can be made. Nevertheless, I do not think anyone examining the situation of our national economy would be so unwise as to take only a few months' outlook. It is essential for anybody in my position to look ahead and to advise the Committee accordingly. I am giving the Committee my considered advice that a concession of that character would be a very severe one at this time.
I hope, however, that a little more attention may be given in the Committee and outside to the considerable relief that I have already given to undistributed

profits. This amounts to a figure approaching £50 million and is an indication of the fundamental attitude of the Government towards the taxation of industry.
Now the question will be raised whether industry can afford the figures which we have suggested. There has undoubtedly been a rise in industrial profits. The figure for 1949 was about £2,100 million. Taking the general figures I can extract, in 1950 this went up to £2,450 million and for 1951 the figure is estimated at £3,050 million.
I mention these figures to show that there is some justification for the attitude I have adopted in regard to the taxation of profits. I think there is some justification, therefore, for the attitude of the Government. I am trying to be as moderate and sensible in my language as I can in order to convince those who have been very critical indeed of the action taken by the Government. I think they will find that the basis on which we stand is a sensible one, and at any rate is conceived with a spirit of great responsibility, and that if there are sacrifices to be made we have tried our best, in the case of the undistributed profits, to give a relief to industry.
I have already stated my opinion in the Committee this evening that this is one of our major national problems. Throughout the administration which I hope we shall carry out, the needs of productive industry will be put first. Nevertheless, having given this undertaking in our election manifesto that there should be an Excess Profits Levy, the course I have taken under the circumstances is the only one that can be taken by a responsible person.
In the position as I see it, we have taken a course which is inevitable at the present time and I believe that if hon. Members will apply their minds to what I have said they will realise that this is the only thing we can do. I am hoping that we shall come to the point when the burdens of industry will be relieved, and in moving this Amendment I look forward to the day when we shall have got out of a period of national emergency and when there will be no further need for the Excess Profits Levy.
I am obliged to the Committee for the spirit in which they have considered the detailed points concerned with the levy.


I am moving the Amendment in the same spirit in which we have considered our previous work, and in the belief that those who have said that I was not stiff enough in the Budget will conceive that, looking ahead, I could not possibly have conceded any more revenue than I have done, and that those who say that I was too stiff in the Budget will understand that under the circumstances I have made a balance between the needs of the nation and the needs of productive industry.

Mr. Crosland: The Amendments which the Chancellor is putting forward constitute the climax to the sad story of changes, blunders and mistakes that we have had ever since this Bill was first introduced. These Amendments represent the most important change in a Finance Bill which could possibly be conceived—a major shift in the emphasis from one tax to another—and we are put in the somewhat humiliating position of considering this major change at a very late stage in the whole progress of the Bill.
The Chancellor has moved the first of his Amendments in a very non-controversial speech, and I should just like to sketch in outline what, I think, will be the attitude of most Members on this side. You are not proposing, Mr. Bowles, to call any of the Amendments which we on this side have tabled, so that it is not open to me to move those Amendments, but I can say that our general attitude on this side of the Committee is that the Profits Tax should have been put back to the level where it stood before the Chancellor introduced his Budget on 11th March.

The Temporary Chairman: Perhaps I should explain that what I said was that those Amendments fall if the Government Amendments are carried. If, of course, the present Amendment is not carried, the right hon. Member for Leeds, South (Mr. Gaitskell) will be able to move his Amendment. The assumption on which the Chairman made his selection obviously was that the Government Amendment would be carried.

Mr. Gaitskell: As you will see from the Order Paper, Mr. Bowles, our first proposal is, in effect, that the reduction in the rate of tax on distributed profits should be greater than is proposed in the Chancellor's Amendment. Is there really

no way by which we may discuss that Amendment? There is a very important distinction. I think that everybody understands the difference, and we are in a very difficult position if the Amendment is not called.

The Temporary Chairman: Perhaps the right hon. Gentleman will allow me to consider this. I am only temporarily in the Chair, and have no say in the matter of selection. I will consider the point, but at the moment the debate will continue on the Chancellor's Amendment.

Mr. Gaitskell: We have, of course, no objection to the debate going on on the various Amendments together.

The Temporary Chairman: I will inquire what the Chairman has to say.

Mr. Crosland: Pending that consideration, perhaps I can continue with the general statement of our attitude on this side of the Committee. If, as you have said, Mr. Bowles, it will be in order for us to move our Amendments in the event of the Chancellor's Amendment being defeated, we merely look forward to the next Division and to a substantial victory on this side, and then the whole technical problem will be settled.

The Temporary Chairman: There is no objection to the hon. Member talking about his own figures in discussing the Chancellor's Amendment. The question is whether, when the times comes, his Amendment will have fallen.

Mr. Crosland: Our argument as far as the figures are concerned is that the figures for the distributed Profits Tax should be put up to where they stood before the Chancellor introduced his Budget. That figure is 26¼ per cent.—that is, the old figure of 50 per cent. when Profits Tax could be made a deduction for Income Tax purposes. So far as undistributed profits are concerned, we hold that they should go back also to the previous figure.
There is logic for our saying that. We on this side have taken the view right from the start that it would have been much better not to have reduced the Profits Tax in the first place and at the same time, not to have imposed the Excess Profits Levy. We have made it clear from this side again and again that we think that the Excess Profits Levy is


a wholly undesirable kind of tax. We would much prefer, therefore, not to have heard anything of the E.P.L. and at the same time not to have had the reductions in the Profits Tax which the Chancellor announced in his Budget.
Had we been discussing these Clauses in their proper position in the Bill—that is to say, as Clauses 29 and 30—before we came to the Excess Profits Levy, we would then have argued against any reduction in the Profits Tax, and then, when we came to the E.P.L., we should have argued against that in addition. In fact, as hon. Members know, for the convenience of the Committee it was decided to take the Excess Profits Levy first, at the urgent request of the Chancellor, and we are now in the position where the Committee has decided to accept the E.P.L.
Had E.P.L. been passed by the Committee with virtually no Amendments, and had the yield from it been expected to be the original figure which the Chancellor gave in his Budget speech, it then might have been somewhat harsh on industry if we from this side had still proposed that none of the Profits Tax reductions should have been made.
9.45 p.m.
But that, of course, is not the position because the Chancellor has made a number of very important concessions during the discussions on the Excess Profits Levy. As a result of that the expected yield from E.P.L. is reduced by about £40 million to £50 million, as compared with the original figure of the Chancellor. By these concessions on E.P.L. the Chancellor himself has taken the opportunity to restore a considerable part of the cuts he made at the same time in the Profits Tax.
As he has just said, he has not, by eliminating part of the Profits Tax concession, got back the whole of the money which he gave away by his E.P.L. concessions. Not only is he losing money on balance, but we have had an enormous number of subjects which the Solicitor-General, or the Financial Secretary or whoever it may be, has promised to look at between now and Report stage; and it will be surprising indeed if a number of further concessions are not made on Report stage. If that is so,

there will be a very significant fall in the yield of E.P.L., possibly by as much as one half, and that will be a very different E.P.L. from the one originally announced by the Chancellor.
If there is to be a fall in the yield of E.P.L. by as much as one half, already it is over one quarter, we hold the view that the proper thing to do with the Purchase Tax is to restore it precisely to where it stood before and not make any Profits Tax concession whatsoever. That is the suggestion of the Amendments which may or may not, according to how the debate on procedure goes, be moved from this side of the Committee.

The Temporary Chairman: I think the hon. Member should give me an opportunity to make the position clear to the Committee. It seems that both sides of the Committee wish to leave out the word "seventeen." It is usual for the Chancellor's Amendment to come before any other Amendment on the Order Paper, at that place by matter of custom. Therefore the next vote, if there is a vote at all, will be that the words "twenty-two" be inserted in the Clause. If it is, there is no room in the Clause to put in any other figure. If that is defeated it is open to any other hon. Gentleman to move that another figure be there inserted such as "twenty-six." I hope that is clear to the Committee; I think it is procedurally correct.

Mr. Crosland: To move the Amendment we must wait until the Government are defeated, but I take it that I am perfectly in order in arguing on the figure in our Amendment.
The reason why we take this view that these figures should be put back to where they were before in view of the nature of the concessions in the Excess Profits Levy are these. It is still the case, taking E.P.L. and the concessions which the Chancellor is making over the Purchase Tax that a great number of companies who will pay under E.P.L., because their profits were no higher than in the standard year, will have their total profits taxation reduced as compared with the previous position. We do not consider that those companies whose profits are no higher during the chargeable period than during the standard years are deserving well of the country.
We think it illogical and unjust that those companies who had no increase in


profits since the standard years should actually find the total rate of taxation on their profits reduced at a time when companies which have substantially increased their profits are now paying an enormous proportion of that increase to the Exchequer. This seems a wholly undesirable principle which has neither logic nor justice in it. It applies to companies whose profits have not increased in the standard period, companies who have taken no notice of the appeals of the previous Government for restraint and have distributed all that they could in higher profits. Even though it is a company which has played its part in the restraint urged on it over the last few years it will be in a better position as a result of this fall in E.P.L. plus reduction in the Purchase Tax. That seems unjustifiable in a situation like the present one.
In addition, we are concerned with anything which reduces the bias against distributed profits. Many hon. Members on this side of the Committee will agree that when hon. Gentlemen opposite argue about the taxation of undistributed profits there is obviously an important point in what they say. When they argue about how important it is to watch that there is the ability in industry to modernise and expand plant, and that obviously undistributed profits are necessary, nobody on this side of the Committee disputes that.
We hold strongly that it is necessary to differentiate most sharply between distributed and undistributed profits. We hold that different considerations apply in these two cases. We are against anything which reduces the bias against distributed as opposed to undistributed profits. These are our reasons for disliking this reduction in Profits Tax combined with the imposition of E.P.L.
This change comes at a most unfortunate moment for the Government. We read in the Press that the Chancellor recently met the trade union leaders. It is assumed from what we read that he has asked for restraint. He has made a number of references during the proceedings on the Finance Bill to various matters in the Bill which he personally hopes might encourage a tendency to restraint on their part.
But surely at such a moment, above all, he should not put himself in the position, as he is doing with these two taxes,

of reducing taxation precisely on the most stagnant companies—the companies which have not expanded their profits at all. It is also the last moment that he should choose to diminish in any way the bias between distributed and undistributed profits. If he wishes restraint from their side, he must watch this point.

Mr. R. A. Butler: On the question of distributed profits—the change from 17½ per cent. to 22½ per cent.—I cannot follow the hon. Gentleman's argument.

Mr. Crosland: I was not talking merely of the increase from 17½ per cent. to 22½ per cent., but of the position as far as profits taxation as a whole is concerned. I was referring not only to changes in Profits Tax, but also to the imposition of E.P.L. which, broadly speaking, is nondiscriminatory between distributed and undistributed profits. I know that there is the question of under-distribution but, broadly speaking, it is non-discriminatory. It is clear that, taking the E.P.L. and the Profits Tax changes together, there is less bias against distributed profits now than there was before the Chancellor introduced the Budget in March.

Mr. Butler: If the hon. Gentleman is sincerely actuated, as I believe he is, by a desire to improve the balance of payments position, he will realise that most of the changes concerned with E.P.L. have had to do with developing enterprising and exporting companies, and so on, which are most important to our balance of payments. I do not think that he is doing justice to my remarks.

Mr. Crosland: I certainly have not tried to impugn the sincerity of the right hon. Gentleman in the slightest. We on this side of the Committee have approved right from the start almost all the Amendments which the Chancellor has tabled to E.P.L. especially the one he has just mentioned which is designed to help exporting raw material producing companies. I admit that E.P.L. is a much better tax now than it was a fortnight ago. But, in spite of that Amendment, I think that the sum total of changes in E.P.L. and Profits Tax taken together give a position which, although not nearly so damaging as it was when the Finance Bill was first published, is, nevertheless, still damaging as compared with the previous state of affairs.
I wish to conclude with a few remarks on the question of giving away money


from the Budget surplus. The Chancellor has given away a certain amount of money by the E.P.L. concessions which he has made in the last few days. I do not believe that the argument against giving away money need be taken too literally and too seriously at the moment. What we should still like the Chancellor to do would be to scrap the E.P.L. and put the rate of Profits Tax back to where it was before. It might be that by doing this he would still lose a certain amount of money, but we must get this question of a Budget surplus in perspective.
The Chancellor, in his Budget speech, was naturally and rightly diffident about making any dogmatic prognostications whether we were in for inflation or deflation in the coming year. I think he was quite right to be diffident, because it was never harder than it was then to see the economic outlook. Looking back, however, it is now clear from what has happened since that the Budget was, if anything, too disinflationary, and not too inflationary.
Unemployment has tended to increase since the Budget, and the general signs of deflation are stronger than they were a few months ago, while any signs of inflation are much less strong. This is proved by the amount of time which we have spent in this House and in Committee on problems such as unemployment in the textile industry, and so on. Therefore, I do not think we need take that particular argument too seriously.
Our theme on this Excess Profits Levy has remained absolutely consistent right from the start. We have never liked E.P.L., and we have always thought that it would penalise not mainly the firms whom the Chancellor wanted to penalise—the firms making high profits out of re-armament. What we said right from the start was that it would penalise the efficient and—

Mr. P. Roberts: Before the hon. Gentleman leaves the question of the Budget surplus, may I ask him if he is suggesting that, because there is this deflationary tendency, there is, therefore, no need to maintain the Budget surplus at the £500 million at which it was fixed in the Budget?

Mr. Crosland: Certainly, I am suggesting that. I agree, in general terms,

though I would not go so far as he did, with the remarks which the hon. Member for Heeley (Mr. P. Roberts) made a few days ago. In view of this increasing deflationary tendency and the growing signs of unemployment, the Chancellor has had more room for manoeuvre in his Budget than a Chancellor normally has.
I was concluding by saying that we have been against E.P.L. from the start. We think it is a wholly unsatisfactory tax, particularly when it is combined with a reduction in the Profits Tax, and, in particular, a reduction in the taxation on distributed profits. Taking these two things together, we have a state of affairs which, even after the improvements which the Chancellor has introduced, is bad both for industrial efficiency and for the distribution of income in the country, and, if we get something which is bad from both those points of view, it is bad indeed.

Mr. Nicholson: I am sorry that the hon. Member for Gloucestershire, South (Mr. Crosland) should attack the Chancellor of the Exchequer for making concessions in this Budget. It seems to me that my right hon. Friend has acted with perfect propriety. He has shown himself open to reason, and has encouraged the Committee to help him, and I wish to pay my tribute to the skill and charm with which he has conducted the debates. We on this side of the Committee appreciate his attitude very much indeed. We believe that, with our help and advice, to which, in many cases, he has graciously yielded, this will be a much better Bill when it leaves the Committee than when it came before us.
I wish to deal with the comparatively restricted question of tax on undistributed profits. I think the Chancellor, in his remarks, showed a true appreciation of the nature of the problem, and we have to thank him, as we do most appreciatively, for having reduced the taxation on undistributed profits. But, holding the views that I do on this question, I think it is not merely a question of expediency but one of principle, I feel bound once again to voice my protest against there being any tax at all on undistributed profits.
The Chancellor has given convincing reasons, I admit, why he cannot do away


with the tax on undistributed profits this year. He says it will cost him £50 million, and that at the moment he cannot afford it. But I do not think this Committee or the public generally ought to conceal from themselves that a tax on undistributed profits is the most meretricious method of living on capital that can be imagined. The reserves of businesses are the industrial life-blood of this country. They are its true wealth. I would rather see an increase in the reserves of companies than a larger Budget surplus, and I think my right hon. Friend would agree with that.
10.0 p.m.
The purpose of reserves in industry is twofold. First, it is to finance the day to day needs of industry at a time of rising prices; and, after all, the amount of the increase in profits, to which the Chancellor has referred, can largely be seen in the increased valuation of inventories. Second, reserves are the only means by which industry can recreate and renew itself and expand, whether by new ventures, new factories and new plant or by new undertakings in foreign countries which may have an element of speculation in them.
I hope that hon. Members will not delude themselves into thinking that under any circumstances whatever there can be any merit or virtue, anything but the greatest fiscal sin, in taxing money placed to reserve. During the early stages of the Bill I used the homely and much overworked simile of killing the goose that lays the golden eggs. The present tax does not kill the goose, but gravely injures it. One should not pull the feathers from the goose one by one until it loses them altogether and, in an excess of modesty, expires.
I hope that the Chancellor will not pay too much attention to the increase in company profits. Most of the companies that have been showing increased profits come under a comparatively few headings and I think it will be found that most small and medium-sized companies are not increasing their profits and it should not be forgotten that most of these increased profits go to the day to day financing of business.
Today, business is like the Red Queen in "Alice Through The Looking Glass." She and Alice had to run very hard for

about 20 minutes to stay where they were, and businesses—which the hon. Member for Gloucestershire, South (Mr. Crosland) sneers at for making a profit—have to make more and more profits to stay where they are. That is always what happens in a period of rising prices.
We on this side of the Committee think that profits are a good thing. Hon. Members opposite think they are something to be apologised for and to be penalised. That is their fundamental weakness. [Interruption.] If the hon. Member will come through the looking glass to this side of the Committee he will see the truth. The Conservative view and the commonsense view on undistributed profits is that it is wrong to tax them and that they represent the economic life of the country.
We had a short debate on undistributed profits on a previous stage of the Bill and we learned the views of hon. Members opposite, notably those of the hon. Member for Edmonton (Mr. Albu). His view on the taxation of profits placed to reserve was that taking a little of those profits did not matter since they were already high enough. That is really the argument of the little boy who goes to the larder to steal his mother's jam and says, "Mother has so much jam that it will not matter if I steal a spoonful or two." His view, and the view of the former Chancellor of the Exchequer, the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), also was that it was a good thing to prevent companies piling up reserves because it increased the share value of those companies on the Stock Exchange and so brought wealth into the pockets of the shareholders.
Because of their belief in their political theory that that sort of increase of wealth is wrong, they are prepared seriously to argue in favour of living on the capital of the nation and of taxing what I have already described as the industrial life-blood of the country. I beseech them not to submit the whole industrial future of the country—because nothing more or less than that is represented in this question of undistributed profits—to the test of such a flimsy political theory.
I have already said that in my view the Chancellor cannot grant this concession this year because it would cost £50 million, but I want to say one word on the question of the economies necessary


to enable him to take a more correct fiscal view next year. I do not think it is any good for us on this side of the Committee, or for anybody else, to say that to bring about economies one has to lop off whole branches of national expenditure. Economies are found by pruning twigs and shoots and leaves, here and there, and not by lopping off whole branches.
At the end of his Finance Bill I believe that my right hon. Friend will be well advised to investigate two questions, among many others. First, there is the question of the measure of reality which exists behind the theory of Treasury control. I think that Treasury control is far more tenuous than most people care to think. Secondly there is the question of investigating the expenditure of local authorities to see how much is forced upon them by administrative acts of central Departments, which are quite outside the control of this House or of the Treasury. I think that this £50 million can be found.
I am grateful to the Chancellor for the fact that he fully appreciates the deep matters of principle which lie behind this question. I note with approval his desire to lead a better and a purer fiscal life, and I hope that when next year comes round he will be able to relieve undistributed profits of any tax whatever.

Mr. Jay: I thought the Chancellor was in not merely a conciliatory but a very contrite mood tonight. He was almost plaintive in the apology he made for his present policy. However, I thought his defence was an exceedingly lame one. What is the truth about the position in which we now find ourselves? First of all, the party opposite made a rash and ill-considered promise. Indeed, the Chancellor virtually said, "I have been landed with this thing and there it is; I cannot help it."

Mr. Butler: The right hon. Gentleman's power of analysis and exegesis is rather exaggerated. I do not think he can read that into the script which I have placed before him.

Mr. Jay: The right hon. Gentleman can look at the words tomorrow. That was the impression I got at that stage. However, at the time of the Budget he introduced what was, in fact, an imprac-

tical scheme of taxation. It was almost universally condemned by the critics. Then, last week, he virtually withdrew his original scheme and introduced what was almost a new Budget; certainly, a quite different series of tax arrangements. He was almost as universally condemned, by most of the Press during the weekend, for this extraordinary series of vacillations.
Now, however, having made all these changes and having abandoned his original scheme and his original case, he still has not quite the courage to sweep away the whole thing. Therefore, after this record of indecision—which is, I suppose, to save face—we are still left with the main evil of this tax. Incidentally, I will not refer to some of the points raised by the hon. Member for Farnham (Mr. Nicholson) at the end of his speech.
I was going to say that we lay down two propositions on this subject of the relative merits of the different forms of profits taxation. First of all, we say that there should not be a large cut in the total of revenue raised in profits taxation. I should have thought that the Chancellor would agree that, in the existing position of the country, and with the obvious need for restraint and stability in prices and wages, the case was overwhelming for not making any net cut in profits taxation. I believe he agrees with that.
Secondly, we say that to raise the necessary revenue from industrial profits, the Profits Tax, which we are discussing, is vastly superior to E.P.L. or to any form of Excess Profits Tax. Since this point does not seem to have occurred to the party opposite at the time of the election, I should like to add to what my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) said about what has been our consistent view. I would add this comment: it has been our consistent view ever since, in October, 1945, my right hon. Friend the Member for Bishop Auckland (Mr. Dalton) swept away the war-time Excess Profits Duty.

Mr. Hugh Dalton: April, 1946.

Mr. Jay: For exactly the same reason, and consistently, in 1947 and 1949 and 1951, instead of imposing this sort of tax, we raised the straight Profits Tax.
I want, therefore, to sum up the reasons why it seemed to us that the Profits Tax


was a comparatively good tax and why it seems to us that E.P.L. is a bad tax. First of all, it is better to have two taxes on profits rather than three. It is much simpler—and surely simplicity is one of the greatest virtues in the administration of taxation. It saves an enormous amount of work for everybody concerned to have two taxes instead of three.
Secondly, with the Profits Tax we can take the ascertainment of profits already made for Income Tax purposes and can save a vast amount of trouble which will arise in all this computation of a standard. Surely that is a very important point. Thirdly—and this has always seemed a most important consideration to me—with the Profits Tax we can discriminate against distributed profits in a way which cannot be done so effectively either by E.P.L. or Income Tax. The Profits Tax, more than Income Tax, or indeed any other tax, is an instrument which can be used to encourage saving, and surely that is another very great advantage.
Next, it does not penalise, to the extent that this sort of levy does, efficiency or expansion or enterprise, because it falls less heavily on the expanding business. Surely this, too, is another advantage—it enables one to raise or lower the taxation on companies without raising or lowering, at the same time, the taxation on individuals. It is often inconvenient for a Chancellor, when constructing a Budget, to be in a position, such as he was under the old Income Tax, of knowing that if he alters the standard rate of Income Tax to raise more taxation from company profits, he will also raise the tax on individuals. He may not wish to do that, and that has always seemed to me another reason why the Profits Tax is a good tax because, if we wish to alter taxation on company profits and not on the ordinary individual Income Tax payer, it enables us to do so.
Further, it is a good tax in an inflationary period because it falls on the equity shareholder and not on the other members of the community, which is what we want at a time when the equity shareholder is making gains and other people are losing through higher prices. It is worth our taking note of these solid reasons for preferring the Profits Tax, which is now under discussion. It is for all these reasons that we should much prefer to see the Chancellor raise that

tax rather than proceed further with his Excess Profits Levy.
10.15 p.m.
I will summarise very briefly what seem to us the main disadvantages on the other side of the E.P.L. The first is surely the appalling complications. As soon as we have the standard year conception introduced into the tax we get the problem of the capital standard and the dilemma about the nominal capital, on the one hand, and the capital used in business, on the other, and all the complications that proceed from that. That is the first obvious objection.
The second is, of course—as is universally admitted—that it penalises the expanding and efficient firm. The third is that it causes an enormous burden of unnecessary and exceedingly unprofitable work—if I may so call it—both for firms and the Inland Revenue. Finally, it still is, of course, in spite of all these changes—and I agree that we have made it a better job than it was a month or a week ago—exceedingly arbitrary between one company and another. It still remains that, even after the changes that have been made.
I should, therefore, like to ask whoever is to reply to the debate on behalf of the Government—if anybody is—this question. We have reached now the point at which—the other night—the Chancellor admitted that it is not possible by E.P.L. to single out what he himself called profits made out of re-armament. Surely, now that we have that admission, there is really no shred of reason left for saying that the famous pledge in the Election manifesto can be implemented only by an Excess Profits Levy.
Why could it not be equally implemented now by raising the Profits Tax? Of course, it is true that the Profits Tax falls on companies other than those engaged in armaments; but now that the Chancellor himself admits that the Excess Profits Levy will do that, too, what reason is there left for saying, even on the grounds of his pledge, that he is compelled to proceed with a tax which we all recognise to be inefficient and wasteful in every way?
Surely even on his own logic he would be perfectly justified now in saying, "I gave this pledge to impose a tax on profits in a wide sense because of the general


economic conditions of re-armament. I propose to do that by increasing the Profits Tax." It will fall, as fairly as taxation can, on all companies in that position, and will be far more efficient and easy to work and far more acceptable both to industry and to Parliament, than the tax he is still forcing on the Committee.

Mr. Ralph Assheton: It is very seldom that I agree with anything that the right hon. Gentleman the Member for Battersea, North (Mr. Jay) says, but there were one or two words in his last speech with which I did agree. I should like to start by saying how profoundly glad many of us are on this side of the Committee to hear what the Chancellor of the Exchequer had to say with regard to the future taxation of profits. He made it quite clear that in his view the taxation of profits was too high. I should also like to thank him for the various Amendments which he has accepted or put forward to the Excess Profits Levy, which have certainly made it a rather more workable job than it was before.
However, I am bound to say I am puzzled and critical of the proposition that he has put to the Committee—the proposition that the Profits Tax should be re-increased. I would draw my right hon. Friend's attention to some sentences in today's "Times." I think they express my views better than I could put them.
The Chancellor's decision to re-increase the distributed rate"—
"The Times" says—
to be quite precise, to reduce the amount of his original decrease—inevitably brings the business taxation aspects of his Budget under fresh review; it was not unfairly said that his changes 'amounted to a section of a new Budget speech.'
It goes on later to say this:
It was conceded from the first that the E.P.L. was intended for a general and ethical purpose and not for the purpose of raising revenue. It should be limited to that purpose, fallacious though it may be, for there is no case for increasing the already punitive tax burden on industry beyond what it was before Mr. Butler's budget.
That is the gravamen of the criticisms from this side of the Committee. We are puzzled to know why the Chancellor thinks it necessary to impose greater taxation on profits than were imposed by the previous Socialist Government.
There have been arguments on the other side of the Committee, particularly from the hon. Member for Gloucestershire, South (Mr. Crosland), with regard to the desirability of taxing distributed profits rather than undistributed profits, and my hon. Friend the Member for Farnham (Mr. Nicholson) has made a speech against the taxation of retained profits with which, I think, most members on this side of the Committee agree.
I would, however, draw the atention of hon. Members opposite to the fact that tax on distributed profits also is paid at the expense of reserves. It is a mistake to think that any taxation which a company has to find is not made at the expense of reserves which might otherwise be made, and it is possible to exaggerate very much the case put by the hon. Member for Gloucestershire, South.
I agreed with my hon. Friend the Member for Farnham that many of the profits we have recently been seeing are quite unrealistic. They are not profits in the sense that there is cash in the till. In many cases much of the profit that there is is the result of rising stock valuations or because adequate depreciation is not allowed, and when one looks for the cash in the company's balance-sheet it just is not there. Many of our greatest companies now have no cash at all and are greatly in debt to the banks. One cannot pay money to the Chancellor unless one can have the cash available or borrows it from the banks. I am afraid that a great deal of tax to be paid in the next 12 months is going to be paid by borrowing from the banks. That is a very unsatisfactory position.
I have pointed out, more than once, that the Chancellor is raising a greater amount in taxation this year than any Chancellor has ever raised before. I think that is deplorable. Four thousand five hundred million pounds is being raised, a greater amount than ever before, and the Chancellor, quite rightly, says that £2,000 million of that is for defence and for payment of interest on the National Debt; but there is a great deal beyond that, and he must find ways and means before next year's Budget of greatly reducing our total expenditure, because unless we do so, I can assure him that this country will not get out of its financial difficulty and we shall not be able to balance our overseas accounts.
There is a close relationship between overspending at home and our overseas balances which must never be forgotten. Some hon. Members have said that sacrifices will fall upon industry, but I would remind the Committee that when sacrifices fall upon industry they fall upon the workers just as much as upon the employers, and very often more so. Therefore, if we over-tax industry, we are going to create dangers for the workers who are just as likely to be unemployed as a result of excessive taxation as the employers are to find themselves in difficulties. I hope that hon. Members on both sides of the Committee will not forget that.

Mr. Houghton: The right hon. Gentleman the Member for Blackburn, West (Mr. Assheton), and the hon. Gentleman the Member for Farnham (Mr. Nicholson) have not told us what we on this side of the Committee have been anxious to know, and that is whether they are satisfied with the tax structure that we have now come to in this Bill. Nor has the Chancellor of the Exchequer told us whether he would have got to where he is had he not been encumbered by the pledge given in the Conservative manifesto about the introduction of some form of excess profits tax.
The Chancellor addressed the Committee a short while ago with his usual sincerity and candour. He told us that it was the only thing that a Minister in his position of responsibility could do, but he did not tell us whether he was the prisoner of events or the prisoner of the policy which the Conservative Party said they would follow if they were elected to Office.
All this began when my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), during the last Parliament, presented a White Paper in favour of a statutory limitation of distributed profits. The present Prime Minister, dissenting at that time from the policy of statutory restraint on distributed profits, said that he preferred some measure of excess profits taxation, and, in constructing his Budget, the Chancellor has given us a three-tier tax structure instead of the two-tier structure which we had before.
In order to fit the Excess Profits Levy into the existing tax structure, the Chancellor has moulded the Profits Tax on his E.P.L. and the E.P.L. on his Profits

Tax, leaving the standard rate on profits where it was. The concessions given in E.P.L. have meant that he has had to come back to the Committee and ask for approval for the reimposition of some of the relief which he was proposing to give in the Profits Tax. Now he has to ask himself whether the position we have reached is preferable to that before he introduced his Budget.
We may ask one or two pointed questions about the present tax structure. Have we a simpler form of taxation? I feel quite certain that the Committee would unanimously agree that we have a more complex system. We have now an additional hidden tax upon industry in the fees which industry will have to pay professional men to unravel the complexities of the new E.P.L. and to advise them as to their best course of action on the various alternatives which the Bill provides.
The hon. Member for Langstone (Mr. Stevens), who is, I understand, an accountant, may be moved to get up in a moment and ask me by what authority I speak for accountants. I will reply to him straight away. I can only speak about accountants, and one thing that we all know about accountants is that they charge quite enough for their services. My great regret about the Bill is that it does not levy a tax on the excess profits of accountants who will make excess profits out of the Excess Profits Levy. They will certainly exact their return from industry for the advice which they will give.
Have we a fairer tax structure? As my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) and other hon. Members have pointed out, many companies will be directly relieved of a substantial portion of their profits taxation, leaving the yield of Revenue to be made good from the additional levy which will be imposed upon those companies liable to E.P.L. In his reflective moments during the course of the Bill, the Chancellor will probably agree that a statutory limitation of distributed profits would have been a much easier thing to explain to the trade unions than this hotch-potch of additional taxation, relief of taxation, increased allowances in Income Tax payers and slashing of the food subsidies.
This medley of financial policy which the right hon. Gentleman has had to put across to the trade unions has manifestly


failed in its appeal to them. In every paper we pick up we read reports of trade union conferences where hard things are being said about the Budget and which are proclaiming in strident notes a policy of wage increases. At this moment the annual delegate conference of my own organisation is in session—well, perhaps not as late as this—but even so—

10.30 p.m.

The Chairman: I think that this Amendment is only to leave out "seventeen" and insert "twenty-two."

Mr. Houghton: Yes, but all this hangs on what the right hon. Gentleman is proposing to do. We are now dealing with the consequences of the ill-considered tax he has proposed, and the great changes he has had to make in it in response—I will not say to pressure, because that offends the right hon. Gentleman—but to advice and representations which have been made to him from various sources. I am quite certain that the right hon. Gentleman cannot feel he has finished up in a satisfactory condition.
Will this three-tier structure and this alteration in the Profits Tax be less harmful to industry than was the two-tier scheme? I think we are all doubtful about that, and not a single word has been said from the benches opposite to confirm him in any belief he may hold that he has got to where he is by his own free will This is not the course the right hon. Gentleman would have chosen for himself. It is certainly not the course which would have been set for him by hon. and right hon. Gentlemen on the opposite side of the Committee. They would certainly have planned a different course for taxation.
If the right hon. Gentleman had wished to impose a form of Excess Profits Tax in a way which would have been clearly understood in the trade union movement and in the country, and in a way which I think would have made a stronger appeal to them than the present tax is ever likely to do, he should have imposed a modest surcharge on excess profits over and above the previous level of both Income Tax and Profits Tax. That, I suggest, would have been a preferable way of dealing with excess profits, if it was necessary to fulfil a pledge to deal

with them at all. I feel quite certain that many difficulties will follow these proposals.
The right hon. Gentleman has been congratulated on his courage on every side. He may need still more before he is through. The main part of his revenue was there waiting to be collected by the simpler and more straight-forward tried methods of Profits Tax. I think he could still meet the wishes of the majority of the Committee by withdrawing E.P.L. altogether and introducing amendments to the Profits Tax which would restore it to its previous level.

Viscount Hinchingbrooke: I am sure an observer of this debate would conclude from the fact that so much weighty argument has been marshalled against my right hon. Friend this evening that he would inevitably have to withdraw his Amendment. Of course, that is not the case at all. We on this side of the Committee will give him his vote this evening in the knowledge that the Government of this country must be carried on and also that he will, by next year, I feel quite certain, have absorbed the advice that he has been given from all sides of the Committee.
I must frankly admit that when I saw this provision for an Excess Profits Levy in the manifesto I was horrified by it. So were a considerable number of my hon. Friends and some of my right hon. Friends. Mention of the Excess Profits Levy found no place in my personal manifesto in my division, and I therefore conclude that no votes were cast for me because of it. We all hoped that it might be possible before we reached this stage of the Finance Bill to merge the Excess Profits Levy and the Profits Tax so that adequate political provision was made for the former, and in the sum total not more would be extracted from industry than was extracted by the Socialist Government last year. But that has not proved to be the case, and we regret it very much this evening
The hon. Member for Gloucestershire, South (Mr. Crosland) spoke about the relationship of this tax to the advice that it is hoped industry would get from the trade union leaders to restrain wage demands. I think that is a connection which lies more adequately and properly between the leaders of the Socialist Party


and the leaders of the trade union movement. I believe that the leaders of my own party and the leaders of the trade unions would do better for this country if they concentrated on their respective tasks. My right hon. Friend and the party on these benches ought to be determined to see that British industry is prosperous and free; that adequate finance is available for development; and that profits, both distributed and undistributed, are sufficient to take care of that.
The trade union leaders I should have thought ought to be concerned to see that their bargaining position and the ability with which they can secure increased wages all round were related to the external circumstances facing this country and the general inflationary situation at home. It does not lie so well for us to attempt to give them advice or use persuasive powers.
I do not understand the philosophy behind this tax. It seems to me to be derived from some conception of the period before the war or even from the First World War itself, when there was a great amount of unemployment to be taken up by State action through rearmament and when certain companies made undue profits. In this day and age of full employment, when there have to be transfers from one sector of the economy to another in order to produce the best possible national effort, I do not understand how the excess profits principle can possibly prevail.
Today we are in the middle of a cold war, and it will be won presumably at one stage by the armaments endeavour and at the other by an endeavour towards commercial prosperity to defeat Communism. What was there so vicious about the years 1947, 1948 and 1949 that they have to be singled out—

The Chairman: I think the noble Lord is going rather wide of the Amendment.

Viscount Hinchingbrooke: I am trying to show the Committee that both the Profits Tax and the Excess Profits Levy in this particular period from 1947 to 1950 were wrongly conceived. I am relating, if I can do so briefly, because I do not wish to detain the Committee for long, the particular political circumstances of the times. I say that the idea is misconceived and should not be

applied. I hope that my right hon. Friend the Chancellor, having seen the weight of public opinion about it in the country, will excise it from the legislation of the country 12 months hence.
We on this side of the Committee believe in incentives in industry. How can we get incentives, how can we restore the prosperity of this country, get people free, independent and competitive, while there is this deadweight of taxation and when we see it increased by our own Government? It is a profound pity that it has to be produced at this particular time. I join with my hon. Friends who have pleaded for greater economy. If my right hon. Friend cannot find £50 million by transferring it from another branch of taxation, surely he can find it by a system of drastic economy in Government expenditure? We went to the polls on the issue of drastic economy in Government expenditure.

The Chairman: I must ask the noble Lord to confine himself to the Amendment.

Viscount Hinchingbrooke: I have almost concluded. I end by enjoining on my right hon. Friend that he should have respect—as I know he has, and would like to have, tied as he is by many circumstances—to the basic philosophy of our party and the issues on which we fought and won the General Election.

Mr. Albu: I am sure that the members of the trade unions will be extremely interested in the views expressed by the noble Lord, which are that they are not to be interested in how the national income is distributed as a whole, but should make a scuffling fight for the remnants they can get from the table of industry. The suggestion that the Chancellor of the Exchequer should not discuss with the trade unions these important matters, or take into consideration their views, is one which does not commend itself to this side of the Committee. The idea that the trade union movement can only be interested in the wages they are able to obtain after a great struggle with the employers, and not in the general distribution of the national income and the way it is spent, is one I thought was as dead as the dodo. But there are so many dodoes on the opposite side of the Committee that the view still exists.
Hon. and right hon. Gentlemen opposite are prone to lecture this side of the Committee and tell us that we do not understand what profits really mean and what the effects of that tax on profits really are. In the views they put forward they continually forget, overlook, or omit to state, the fact that profits retained in a business belong to individuals and are eventually paid out in distribution of dividends, even if for the time they are employed in the business.
This is, of course, one of the difficulties with which the Committee is faced year after year, because as my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) has pointed out, we are anxious to see that industry has sufficient funds at its disposal to carry out investment within the physical limits of the available resources. There is no evidence that they have not been able to do so so far, but we have to bear in mind the results of their doing so in terms of the distribution of the national income.
10.45 p.m.
I have put this issue before the Committee in previous years. It is stated, although there has been great exaggeration about the strain to which industry has been put—generally by bank chairmen, company chairmen, or hon. Gentlemen opposite who are interested in industry—that some companies, perhaps many companies, have had to borrow money from the banks or raise extra capital in order to expand and possibly to maintain their assets. The latter I very much doubt. When I said something of this sort last year, the present Colonial Secretary, at a moment when for personal reasons I was unable to be present, delivered himself of some elephantine humour on the subject. He made very heavy weather of it indeed.
I suggest that there is nothing unjust or wrong in business having sometimes to raise additional money, either by loan or more permanent capital, to expand, and that industry has no permanent right to expand continuously out of profits. We certainly want to see a rate of return of capital such as will continue to attract savings. But there is no evidence that during the last few years that has been impossible.
There is a continuous demand opposite that there must be a great reduction in taxation, but the right hon. Member for Blackburn, West (Mr. Assheton) gave it away when he said that it made no difference whether the tax was on distributed or on undistributed profits. It is a demand that there should be a very much greater return to those who invest their money as shareholders in companies. [Interruption] I am glad to have that confirmation; it is admitted by Members opposite that what they want is a very much greater return for those who put their money into ordinary shares, the investors in equity capital.
They have first to ask themselves whether the present return is high enough or not. I suggest that in regard to a large part of the companies of this country it is not only adequate but more than adequate. It is true that the yield required from ordinary shares has been put up by the Chancellor's dear money policy, but there is no doubt that the return made to ordinary shareholders is at present sufficient to ensure an adequate flow of capital, at any rate, for the large public companies. The justice of this claim that somehow the shareholders of industry are entitled to maintain their personal investment in industry at a constant level in real terms, no matter what happens to the savings of any other members of the community, is not supported even by some of those who do not support this side of the Committee.
The hon. Member for Langstone (Mr. Stevens) will no doubt be well acquainted with the articles that have appeared in the "Economist" by a chartered accountant, Mr. H. A. Briscoe. This is the journal of the Institute of Chartered Accountants. Particularly I have in mind one of 26th April. They are directed to the point that at a time of inflation businessmen and others with money in industry have no more right than other people to maintain the real value of their wealth. If I may just quote a small portion from one of these most interesting articles, referring to the businessman in a period in which prices are rising and therefore the cost of replacement of assets and so on are rising too, the writer states:
Although his income for any period is the difference between his wealth at the beginning and end of that period, this does not of necessity entitle him to calculate that wealth in real terms, and the fact that calculating it in money


terms transgresses an economic law may be safely ignored because saving will make up the difference.

Mr. Stevens: The hon. Member said no ordinary shareholder is entitled to expect that he should maintain the real value of his capital. Is there any relation between that right and the right of the worker, by increases in money wages, to maintain the real value of his wages?

Mr. Albu: I see absolutely no connection whatever between them. The wages received by the worker are the return for the work he does. What does the shareholder do? He does not work. [An HON. MEMBER: "He risks."] He undergoes a risk, and I am entirely in favour of a shareholder receiving a return that covers and more than covers his risk.

Mr. Stevens: Would not the hon. Member agree that that is a reward for savings just as wages are a reward for work?

Mr. Albu: Rewards for savings and for risk should both be covered. But if any hon. Member takes the trouble to work it out over the last 25 or 50 years, he will find that the reward of the ordinary shareholder in a public company is much more than a reward for savings or a reward for risk. I have made some calculations, and many other people have made similar calculations. I am referring to shareholders in large public companies which represent a large part of the economy of this country.

Major Sydney Markham: Has not the hon. Member heard of shareholders in 1,500 companies who, during the last five years, have lost their entire ordinary capital?

Mr. Albu: I have taken that into account. It is obvious that this sort of argument gets very much under the skin of hon. Members opposite because they know it is true. There is, however, a class of company, the small and expanding companies, which is most hit by the Chancellor's Excess Profits Levy, to which, of course, what I have been saying does not apply—where the owners are working in the business and it is much more difficult for them to obtain fresh capital.
I hope we shall have the support of hon. Members opposite in a new Clause which we have put down to raise the exemption from Profits Tax for these

small companies from £2,000 to £5,000. But on the other hand, we should do nothing at present to make life easier for the ordinary shareholders in large public companies who have been receiving in recent years more than enough both for savings and for the risks they undergo.

Mr. Erroll: I do not propose to try and follow the intricate arguments of the hon. Member for Edmonton (Mr. Albu) as it would take too long tonight. I only wish to draw the attention of the Committee to one or two points. First, we have moved a long way from the original conception of E.P.L. We have now a reduced E.P.L. and an increased Profits Tax, and one of the main reasons given for this change is that the Revenue must be safeguarded. It was never part of the original conception that revenue was to be one of the main objects of the new taxation; and it is very dangerous to expect now that the Chancellor will obtain automatically a large, substantial revenue from an increased Profits Tax and the Excess Profits Levy.
It appears almost to be a crime to earn big profits, and now, in addition, to distribute them. Having been earned, they must not be distributed. If they are distributed, they are to be heavily taxed. I would put it to the Financial Secretary, that if these two forms of earning are to be so heavily taxed it might be better if fewer profits were earned. Is that what the hon. Gentleman wants? Would it be better if no fortuitous re-armament profits were earned? Would it suit the Chancellor's book better if fewer profits were distributed, so that the yield would fall? That is undoubtedly one of the effects of the policy being pursued.
A great deal of the discussion this evening has been largely academic. We are assuming that large profits are going to be earned. I was surprised to hear the Chancellor quoting so easily the increased profits of industrial companies for the last three or four years, which mounted until the last year. I suggest that in the current year there will be a considerable and dramatic change, and that any Chancellor who is contemplating balancing the books next year will be well-advised to count on a considerably reduced yield from profits, whether they are taxed through E.P.L., Profits Tax, or Income Tax, during the coming year.
The Chancellor referred particularly to a large increase in profits last year. One of his own White Papers says that nearly one-third of that increase came from stock appreciation, a fictitious form of profit assessment, although it has to be paid for in cash to the Inland Revenue on the due date. In many companies to-day stock values have been depreciating, producing a paper loss which is, in a sense, just as fictitious as a paper profit, but still allowed to be set off against profits.
I suggest that while the Chancellor has good reason to feel that he has improved upon the original scheme of E.P.L., by the changes he has made, he would be unwise to count on an increase in revenue from taxation of company profits in the coming year. I think that tonight we are witnessing the twilight of large company profits, with the exception of one or two of the large firms or companies quoted. The smaller, medium-sized companies are seeing the end of large profits, whether easily or hard earned.

Mr. Roy Jenkins: We have had the usual kind of debate to which we are becoming accustomed on any Clause or Amendment which raises a general principle on this part of the Finance Bill, with several hon. Members on that side of the Committee bitterly attacking the Chancellor. All three of those hon. Members—the right hon. Member for Blackburn, West (Mr. Assheton), the hon. Member for Dorset, South (Viscount Hinchingbrooke), and the hon. Member for Farnham (Mr. Nicholson)—were so overcome with distaste for the Chancellor that they have not been able to sit in the Chamber for a moment after making their speeches. The debate has followed a pattern which is becoming increasingly familiar.
We on this side of the Committee have been more friendly, although we would have much preferred to have the Profits Tax kept at the level at which it stood before the Chancellor made his Budget statement on 11th March. We can see, at present, no argument for reducing the total weight of taxation on those companies which do not pay E.P.L., which is necessarily involved in any reduction of profits tax. Companies which do not attract E.P.L., are having their total weight of taxation reduced. I cannot understand what argument the Chancellor

of the Exchequer can bring forward for such re-distribution of the burden.
We all know that the Chancellor is looking to the future and saying that he hopes that it will be possible to reduce the burden in the future. I should like to hear why he thinks it right that, in a situation in which he is not decreasing but actually increasing the total burden of corporate taxation, he should reduce the burden on those companies which have expanded least.
11.0 p.m.
Another thing which worries us about the changes which we are discussing is that—as my hon. Friend the Member for Edmonton (Mr. Albu) said in one of our debates on the Bill—we are having a change in the Profits Tax which will probably be a permanent one, compensated for to some extent by this Excess Profits Levy. From every speech which has been made from the other side of the Committee tonight it is very clear that the Chancellor is only just getting away with it this year, so far as his own back benches are concerned; but he has been given some very harsh warnings about the position next year unless he makes some very big concessions to profits.
I have no doubt that, if the present Chancellor is still Chancellor then, the right hon. Member for Blackburn, West, will be very difficult to get into the Division Lobby in support of the Finance Bill unless there are some big concessions made in the Profits Tax. This has been made clear time and time again. We are in a position in which, by this temporary sop in the Excess Profits Levy, we are seeing a permanent reduction in the Profits Tax.
We have had quite powerful arguments addressed to the Committee by the hon. Member for Farnham against the whole principle of taxation of undistributed profits. From a certain point of view one can see some force in those arguments; but I think that it is extremely important to remember, at the same time—as my hon. Friend the Member for Edmonton has pointed out this evening and on previous occasions—the distributory effects which are involved in the taxation of undistributed profits. I cannot understand hon. Members adopting a scornful attitude towards the serious arguments which have been put forward by my hon.


Friend. Even if hon. Members opposite do not agree with them they are worthy of extremely serious consideration.
A further point which is involved in this question of the taxation of undistributed profits—though I do not suppose I shall carry hon. Members opposite with me on this—is that from the point of view of the total volume of savings available to pay for investment it does not greatly matter whether they are in the form of a Budget surplus or of undistributed profits. They are both savings and they both fulfil the same purpose of paying for investment.

Mr. Erroll: indicated dissent.

Mr. Jenkins: I should have thought that that was an elementary principle, even for the hon. Member for Altrincham and Sale (Mr. Erroll). I thought we could have started off with that simple measure of agreement and gone on to rather more difficult things.
From another point of view, however, there is a difference between the two things and that is, that if one has a larger proportion of undistributed profits and a smaller Budget surplus the amount of public control one has over the direction of investment is to that extent diminished. That is certainly a consideration which has to be taken into account. There is no form of investment more difficult to control that that which is paid for out of undistributed profits of companies.
I do not want to detain the Committee any longer, but I would put one last point to the Chancellor. We believe that the Profits Tax is much better than the Excess Profits Levy, and if the Chancellor has any general arguments for showing that the Excess Profits Levy is a better tax than the Profits Tax we should be very interested to hear them. We should much prefer the Profits Tax to be left at its previous level, and although the Chancellor's Amendments go some way to remedy the situation we do not think they go far enough.

Mr. R. A. Butler: I do not want to check the debate; but the Government feel that we must get Clause 29 tonight. After that we do not want to be unreasonable about the hour to which we should sit. I think we can make progress tomorrow; we have made good progress to-day. I feel that it should not be necessary to discuss this on the Question that

Clause stand part of the Bill because we have really used this debate as a general one, and hon. Members have been generous in letting us take their Amendments as part of the general debate.
I will, therefore, answer shortly, as we have debated this subject so often before, some of the points raised. The hon. Member for Gloucestershire, South (Mr. Crosland) suggested that, owing to the manner in which we had attempted to meet the Amendment put forward, in the end the Excess Profits Levy will be reduced by half. By that, he means £100 million will be taken off. That is a great exaggeration and I do not see any chance of any such consumption being reached. There is no question that the smaller and comparatively detailed points, to which my hon. Friends, who have put up such a good show in explaining this matter to the Committee, referred, will yield that sort of amount, or that they will materially alter the sums or arithmetic I have given to the Committee.
The next main point raised was by the right hon. Gentleman the Member for Battersea, North (Mr. Jay), a point which was taken up by the hon. Member for Stechford (Mr. Roy Jenkins), and referred to by my hon. Friend the Member for Altrincham and Sale (Mr. Erroll). This was the question of the Profits Tax versus the Excess Profits Levy. Both these forms of tax have great defects. The difficulty of the Excess Profits Tax is that it falls on the just and the unjust. It falls on those who make profits and those who do not make profits.
If profits rise, it does not necessarily hit only those who make the excess profit. It hits those who are unable to make a profit. That has been part of the argumentation of right hon. Gentlemen and hon. Gentlemen opposite because they have said that, by the original proposal to reduce the profits tax, we were discriminating in favour of firms which were not adventurous. They can not have it both ways.
There is an Achilles' heel in the Excess Profits Tax and there is equally an Achilles' heel in the Excess Profits Levy. The advantage of the Excess Profits Levy over the Excess Profits Tax is that it is a tax to take the excess profit off firms who have profited by the injection of Government orders into our economy. The difficulty about the Excess Profits


Levy, as the Committee knows, is its intense complexity and the difficulty we have had in making it absolutely fair. All I can say to my hon. Friend the Member for Altrincham and Sale is that if there is no increase in industrial profits the Excess Profits Levy to that extent will not operate and, therefore, if I am wrong in my figures—and I do not know whether I am or not—the Excess Profits Levy will then, in any case, not be an unfair tax.
A combination of the two forms of tax is just as likely to be as fair as the suggestion that a reliance on the Excess Profits Tax, which falls on the successful and unsuccessful, would be a fairer way of dealing with this difficult question. I accept the argument that industry has been going through difficult times and that part of the difficulty relates to stocks. Up to a certain date, the tide of industrial profit has certainly been coming in.
My right hon. Friend the Member for Blackburn, West (Mr. Assheton) put two main points. First, why there was this increased burden on industry and, second, why I have had to raise such a great burden of taxation. The latter point was taken up by my hon. Friend the Member for Dorset, South (Viscount Hinchingbrooke), who asked me to economise in Government expenditure. It would be possible for me to enter into a quarrel with my right hon. Friends and hon. Friends on this side of the Committee, but I wish to confine myself to saying this. The reason I intend, and the Government intend, to adhere to this tax and to put it through is that we told the electorate as a party that we were going to do so, and I intend to implement the decision which we told the electorate we were going to carry out. That is the only answer I shall make to the points that have been raised in that connection.
It was then suggested that I had raised a record amount of taxation. If anybody, either abroad or in this country, looks at our burdens they will realise that we are taking on an unprecedented burden in time of peace for a country of our size. We are taking on a defence programme which is the pride and envy of the world. There is no country which is doing anything like what our country is doing. There is no country in Europe so far which has carried on a defence programme anything like ours.
There is no country in the world which can boast social services such as we intend to maintain, and there is practically no country in the world which is crippled by such immense overseas expenditure, with troops in the four quarters of the globe, with our world-wide responsibilities as a great Power. Those are the burdens which our Exchequer has to carry at the present time, and, as far as I am concerned, I shall maintain the revenue so that the Exchequer at home can be sound.

Mr. P. Roberts: Does that include the necessity for the Budget surplus of £500 million?

Mr. Butler: I have dealt with that point before in my Budget speech, and I fear that I would not be in order if I were to pursue it now.
The question of a Budget surplus can be debated until the cows come home, but there are certain commitments which have to be carried out, such as our responsibility under the present system—I say "under the present system" because we can always look ahead to better and happier times—to make advances to local authorities and other matters, and I consider that we should at the present time support a surplus of the size which we intend to support. I go further. If we can reduce taxation and Government expenditure—and here I agree with my hon. Friends on this side of the Committee—that will be the best way for our future salvation, and then there will be all the less need for an immense surplus.
On this question of expenditure I would remind the Committee that I do not believe any Chancellor in recent years has had to take such unpopular decisions in reducing Government expenditure as I took for definite national reasons, which have proved on the whole to bring about results, at any rate in the form of confidence in our currency. I do not think that such efforts to reduce the size of the heavy burden of expenditure have been made before in such a short period of six months. I will certainly carry them forward. It would not be a bad thing occasionally if certain of the financial policies of the Government were given the support at home which they get abroad.
The last point to which I would refer is the very serious matter of the wage demands and the attitude of the trade unions. I do not wish to bring this into the argument, but I happened to mention it casually in a debate, and it has become the subject of great comment outside. It is not the only motive I have in my mind. From what I have seen of the trade union leaders, they are far too independent and experienced to be moved by any single argumentation. I realise that they have their own economic staffs and economic capabilities.
I make this appeal to the Committee: Do not run down or criticise any attempts to deal with this question of inflation. I have noticed a tendency in some speeches to put the wrong emphasis on this matter. One step alone will not do the trick, but I believe that the trade unions will be affected by the sincerity of our approach, and if they see that all quarters of the Committee are equally sincere in dealing with this question of inflation and with all these analogous questions I believe that we shall have greater moderation than we should otherwise get. I do not claim more than that.
After all, this is a free country, and it would appear from our debate tonight that this is a free Committee. Everybody is entitled to his opinion. I do not resent anybody's opinion. I am simply going to carry out my duty as I expressed in the Conservative Election manifesto, in company with many others, to the electorate; and this part of the story—that is to say, adjusting the reduction in Profits Tax—is part of the step which I have been obliged to take.

11.15 p.m.

Mr. Gaitskell: The Chancellor will not be surprised if I tell him that some parts of his speech—those when he was refer- ring to the burdens which this country has to carry and the external difficulties with which we have had to contend—will be received with sympathy on this side of the Committee. After all, we had to explain that very frequently when we were the Government. It is perhaps a pity that it was not received with the same sympathy when the Conservative Party were in opposition. However, better late than never. If they now appreciate the reality, that at any rate is a step forward.
During a large part of the debate, as in other debates, we were listening to a rather angry argument within the Conservative Party. I want to make it plain to start with that I by no means agree with all those who have attacked the Chancellor. Some points of view expressed from the Conservative back benches seemed to me to be extremely reactionary and certainly not worthy of serious consideration by the Opposition.
I agree with the Chancellor to the extent that there was a problem of steadily arising profits, considerable inflationary pressure, a large defence programme and with the view expressed in some quarters that it might give rise to fortuitous profits and a serious wage problem. In all those circumstances, to have sat back and to have done nothing about it but actually reduce the taxation on profits would have been sheer lunacy. That is the kind of thing some hon. Gentlemen opposite would nevertheless have wished to do. I commend the Chancellor for resisting the extremists in his own ranks.
There were three alternatives which any Government would have had to consider, and which we had to consider when we were framing the Budget last year. One could in the light of the rising profits have increased the Profits Tax, one could have imposed dividend limitation, or one could have imposed an Excess Profits Levy. As I said earlier, anybody who says that one need have done nothing at all needs no consideration. Each of those alternatives could have been adopted. We increased the Profits Tax, and also, owing to the fact that dividends continued to increase, decided to increase dividend limitation.
There remains only the last course. The real reason for putting this plan into the manifesto was that it was the only thing that the present Prime Minister could think of putting in. But the fact still remains that it was a very bad choice, and it would have been far better if the Chancellor had swallowed his political pride and said that, after all, the Labour Party were right and that it was better to deal with the matter on the basis of Profits Tax and dividend limitation.
I cannot refrain from referring to the attack on the Chancellor by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke). We can see very easily that he was getting his own


back for the smack in the face which he got at our last Sitting when the Chancellor was, by implication, extremely rude to him. I could not help being rather interested in these tearful pleas for economy coming from the Conservative back benches. They were pressnig very often for economy when we were in the Government, and very frequently we were explaining to them that unless one proposed to cut the social services or defence it was not possible to make major economies.
The Chancellor, of course, understands that now, and so does most of the country, but not the Conservative Party. I am afraid that the noble Lord is still in a dodo frame of mind. I suppose he will go on being in that frame of mind until eventually, after a further period of thought, even he may come to understand that we cannot have our cake and eat it.
The case against the tax has been argued very fully and very competently by my right hon. and hon. Friends with some assistance from hon. Gentlemen opposite. It is a very complex tax. That we certainly agree. It will make tremendous difficulties not only for the Inland Revenue but for accountancy staffs everywhere. It will certainly be an incentive to inefficiency and waste. That is, I suppose, the major case against it. It cannot really be defended on the ground that the revenue is needed because the Chancellor has told us that that is not the main purpose of it and, in fact, that if it is paid out of undistributed company profits there will be a fall in corporate savings and, therefore, no gain from the anti-inflationary angle.
If we had a few firms making large profits directly as a result of defence while everyone else's profits were at a much lower level there would be a strong case for an Excess Profits Levy. That is not the picture—and here I must agree with the noble Lord. In the present situation we have had, on the contrary, a fairly general rise in profits, some of it fortuitous undoubtedly, but a good deal of it spread widely and by no means all in the defence industry. At the same

time, of course, a number of firms are making larger profits as a result of their enterprise, their development, and their initiative.
That makes the picture—there will be some cases where profits are very fortuitous, and in other cases it will be as a result of their efforts. But that is usually the case in any period which is at all inflationary. You will have your general increase, some of it incidental, and some of it resulting from more serious effort. I do not think in such a situation one can seriously argue that an Excess Profits Levy is necessary on moral grounds. On the contrary, everything points in these circumstances to increasing the Profits Tax as the right method of dealing with the situation.
I must make it plain once again that it is not the total weight of taxation on industry we complain about. It is the distribution of the burden which is now so arranged as to fall most heavily upon the most enterprising firms. That is our case in a nutshell against this tax. The Chancellor has made Amendments. He has, in fact, reduced the burden of the Excess Profits Levy in a number of directions, of most of which we approve, and he has increased the Profits Tax on distributed profits.
For that reason I would not advise my hon. Friends to vote against this particular Amendment. Nevertheless, in all the circumstances and because the right hon. Gentleman has still only gone a small part of the way back to the policy we favour, I advise my hon. Friends that when we come to it, we should vote against the Clause.

Amendment agreed to.

Further Amendment made: In page 32, line 28, leave out "fifteen," and insert "twenty."—[Mr. R. A. Butler.]

The Chairman: Under Standing Order No. 45, I have to put the Question that the Clause stand part forthwith.

Question put, "That the Clause, as amended, stand part of the Bill."

The Committee divided: Ayes, 187; Noes, 164.

Division No. 145.]
AYES
[6.40 p.m.


Acland, Sir Richard
Fraser, Thomas (Hamilton)
Messer, F.


Adams, Richard
Freeman, John (Watford)
Mikardo, Ian


Albu, A. H.
Gaitskell, Rt. Hon. H. T. N
Mitchison, G. R


Allen, Arthur (Bosworth)
Gibson, C. W.
Monslow, W.


Attlee, Rt. Hon. C. R.
Glanville, James
Moody, A. S.


Awbery, S. S.
Grey, C. F.
Morgan, Dr. H. B. W.


Balfour, A.
Griffiths, David (Rother Valley)
Morrison, Rt. Hon. H. (Lewisham, S.)


Barnes, Rt. Hon. A. J.
Griffiths, Rt. Hon. James (Llanelly)
Moyle, A.


Bartley, P.
Griffiths, William (Exchange)
Mulley, F. W


Bellenger, Rt. Hon. F. J.
Hale, Leslie (Oldham, W.)
Murray, J. D.


Bence, C. R.
Hall, John (Gateshead, W.)
Noel-Baker, Rt. Hon P. J.


Benn, Wedgwood
Hamilton, W. W.
O'Brien, T.


Benson, G.
Hannan, W.
Oliver, G. H


Bevan, Rt. Hon. A. (Ebbw Vale)
Hardy, E. A.
Oswald, T.


Blackburn, F.
Hargreaves, A.
Padley, W. E


Blenkinsop, A.
Harrison, J. (Nottingham, E.)
Paget, R. T.


Boardman, H.
Hayman, F. H.
Paling, Rt. Hon. W. (Dearne Valley)


Brockway, A. F.
Henderson, Rt. Hon. A. (Rowley Regis)
Pannell, Charles


Brook, Dryden (Halifax)
Herbison, Miss M.
Pargiter, G. A.


Broughton, Dr. A. D. D.
Holman, P.
Parker, J.


Brown, Thomas (Ince)
Holmes, Horace (Hemsworth)
Paton, J.


Burke, W. A.
Houghton, Douglas
Pearson, A.


Burton, Miss F. E.
Hoy, J. H.
Plummer, Sir Leslie


Butler, Herbert (Hackney, S.)
Hudson, James (Ealing, N.)
Porter, G.


Callaghan, L. J.
Hughes, Emrys (S. Ayrshire)
Price, Joseph T (Westhoughton)


Castle, Mrs. B. A
Hynd, H. (Accrington)
Price, Philips (Gloucestershire, W.)


Champion, A. J.
Hynd, J. B. (Attercliffe)
Proctor, W. T.


Chapman, W. D
Irvine, A. J. (Edge Hill)
Pryde, D. J.


Chetwynd, G. R.
Irving, W. J. (Wood Green)
Pursey, Cmdr. H


Clunie, J.
Janner, B.
Rankin, John


Cocks, F. S.
Jay, Rt, Hon. D. P. T.
Reeves, J.


Coldrick, W.
Jeger, George (Goole)
Reid, Thomas (Swindon)


Collick, P. H
Jeger, Dr. Santo (St. Pancras, S.)
Rhodes, H.


Cove, W. G.
Jenkins, R. H. (Stechford)
Richards, R.


Crosland, C. A. R
Johnson, James (Rugby)
Roberts, Albert (Normanton)


Cullen, Mrs. A.
Johnston, Douglas (Paisley)
Robinson, Kenneth (St. Pancras, N.)


Dalton, Rt. Hon. H.
Jones, David (Hartlepool)
Rogers, George (Kensington, N.)


Davies, A. Edward (Stoke, N.)
Jones, Frederick Elwyn (West Ham, S.)
Royle, C.


Davies, Ernest (Enfield, E.)
Jones, Jack (Rotherham)
Schofield, S. (Barnsley)


Deer, G.
Jones, T. W. (Merioneth)
Shackleton, E. A. A


Dodds, N. N.
Keenan, W
Shinwell, Rt. Hon E.


Donnelly, D. L.
Key, Rt. Hon. C. W.
Shurmer, P. L. E.


Driberg, T. E. N.
Kinley, J.
Silverman, Julius (Erdington)


Dugdale, Rt. Hon. John (W. Bromwich)
Lee, Frederick (Newton)
Silverman, Sydney (Nelson)


Ede, Rt. Hon. J. C.
Lee, Miss Jennie (Cannock)
Simmons, C. J. (Brierley Hill)


Edwards, John (Brighouse)
Lewis, Arthur
Slater, J.


Edwards, Rt. Hon. Ness (Caerphilly)
Lindgren, G. S.
Smith, Ellis (Stoke, S.)


Edwards, W. J. (Stepney)
Logan, D. G.
Smith, Norman (Nottingham, S.)


Evans, Albert (Islington, S. W.)
MacColl, J. E.
Snow, J. W.


Evans, Edward (Lowestoft)
McGhee, H. G.
Sorensen, R. W.


Evans, Stanley (Wednesbury)
McInnes, J.
Soskice, Rt. Hon. Sir Frank


Ewart, R.
McKay, John (Wallsend)
Sparks, J. A.


Fernyhough, E
McLeavy, F.
Steele, T.


Fienburgh, W.
MacPherson, Malcolm (Stirling)
Stewart, Michael (Fulham, E.)


Fletcher, Eric (Islington, E.)
Mainwaring, W. H
Stokes, Rt. Hon. R. R.


Follick, M
Mallalieu, J. P. W. (Huddersfield, E.)
Strachey, Rt. Hon. J.


Forman, J. C.
Manuel, A. C.
Summerskill, Rt. Hon. E.




Swingler, S. T.
Wallace, H. W.
Williams, Rt. Hon. Thomas (Don V'll'y)


Sylvester, G. O.
Watkins, T. E.
Williams, W. R. (Droylsden)


Taylor, Rt. Hon. Robert (Morpeth)
Webb, Rt. Hon. M. (Bradford, C.)
Williams, W. T. (Hammersmith, S.)


Thomas, David (Aberdare)
Weitzman, D.
Wilson, Rt. Hon. Harold (Huyton)


Thomas, Ivor Owen (Wrekin)
Wells, Percy (Faversham)
Winterbottom, Richard (Brightside)


Thorneycroft, Harry (Clayton)
West, D. G.
Woodburn, Rt. Hon. A


Tomney, F.
Wheatley, Rt. Hon. John
Wyatt, W. L.


Ungoed-Thomas, Sir Lynn
White, Henry (Derbyshire, N. E.)
Yates, V. F.


Usborne, H. C.
Willey, Frederick (Sunderland, N.)



Viant, S. P.
Williams, Ronald (Wigan)
TELLERS FOR THE NOES:




Mr. Wilkins and Mr. Wigg.




NOES


Aitken, W. T.
Gammans, L. D.
Nabarro, G. D. N.


Allan, R. A. (Paddington, S.)
Garner-Evans, E. H
Nicholson, Godfrey (Farnham)


Alport, C. J. M.
George, Rt. Hon. Maj. G. Lloyd
Nicolson, Nigel (Bournemouth, E.)


Amory, Heathcoat (Tiverton)
Gough, C. F. H
Noble, Cmdr. A. H. P.


Anstruther-Gray, Maj. W. J.
Graham, Sir Fergus
Nugent, G. R. H


Arbuthnot, John
Gridley, Sir Arnold
Oakshott, H. D.


Ashton, H. (Chelmsford)
Grimston, Hon. John (St. Albans)
Odey, G. W.


Assheton, Rt. Hon. R. (Blackburn, W.)
Grimston, Sir Robert (Westbury)
O'Neill, Rt. Hon. Sir H. (Antrim, N.)


Astor, Hon. J. J. (Plymouth, Sutton)
Harden, J. R. E.
Ormsby-Gore, Hon W D.


Astor, H. W. W. (Bucks, Wycombe)
Hare, Hon. J. H
Orr, Capt. L. P. S


Baldock, Lt.-Cmdr. J. M.
Harris, Frederic (Croydon, N.)
Osborne, C.


Baldwin. A. E.
Harris, Reader (Heston)
Partridge, E.


Barber, A. P. L.
Harvey, Air Cdre. A. V. (Macclesfield)
Perkins, W. R. D


Beach, Maj. Hicks
Harvey, Ian (Harrow, E.)
Peto, Brig. C. H. M.


Bell, Philip (Bolton, E.)
Harvie-Watt, Sir George
Peyton, J. W. W.


Bell, Ronald (Bucks, S.)
Higgs, J. M. C.
Pilkington, Capt. R A


Bennett, F. M. (Reading, N.)
Hinchingbrooke, Viscount
Pitman, I. J.


Bennett, William (Woodside)
Holland-Martin, C. J.
Powell, J. Enoch


Bevins, J. R. (Toxteth)
Hollis, M. C.
Price, Henry (Lewisham, W.)


Birch, Nigel
Holmes, Sir Stanley (Harwich)
Prior-Palmer, Brig. O. L.


Bishop, F. P.
Holt, A. F.
Profumo, J. D.


Bossom, A. C.
Hornsby-Smith, Miss M P.
Raikes, H. V.


Boyd-Carpenter, J. A.
Horobin, I. M.
Rayner, Brig. R.


Boyle, Sir Edward
Horsbrough, Rt. Hon. Florence
Redmayne, E.


Braine, B. R.
Hudson, Sir Austin (Lewisham, N.)
Remnant, Hon P.


Braithwaite, Lt.-Cdr G. (Bristol, N.W.)
Hudson, W. R. A. (Hull, N.)
Renton, D. L. M.


Brooman-White, R. C.
Hulbert, Wing Cmdr. N. J
Roberts, Peter (Heeley)


Browne, Jack (Govan)
Hurd, A. R.
Robinson, Roland (Blackpool, S.)


Buchan-Hepburn, Rt. Hon. P. G. T
Hutchinson, Sir Geoffrey (Ilford, N.)
Rodgers, John (Sevenoaks)


Bullard, D. G.
Hutchison, Lt.-Com. Clarke(E'b'rgh W.)
Roper, Sir Harold


Bullus, Wing Commander E. E.
Hylton-Foster, H. B. H.
Ropner, Col. Sir Leonard


Burden, F. F. A.
Johnson, Eric (Blackley)
Russell, R. S.


Butcher, H. W.
Jones, A. (Hall Green)
Ryder, Capt. R. E. D.


Butler, Rt. Hon. R. A.(Saffron Walden)
Joynson-Hicks, Hon. L. W.
Salter, Rt. Hon Sir Arthur


Carr, Robert (Mitcham)
Keeling, Sir Edward
Schofield, Lt.-Col. W. (Rochdale)


Cary, Sir Robert
Lambert, Hon. G.
Scott, R. Donald


Channon, H.
Lambton, Viscount
Scott-Miller, Cmdr. R.


Clarke, Col. Ralph (East Grinstead)
Lancaster, Col. C. G
Shepherd. William


Clarke Brig. Terence (Portsmouth, W.)
Law, Rt. Hon. R. K
Simon, J. E. S. (Middlesbrough, W.)


Conant, Maj. R. J. E.
Leather, E. H. C.
Smithers, Peter (Winchester)


Cooper-Key, E. M
Legge-Bourke, Maj. E. A. H.
Spearman, A. C. M.


Craddock, Beresford (Spelthorne)
Legh, P. R. (Petersfield)
Spence, H. R. (Aberdeenshire, W.)


Crookshank, Capt. Rt. Hon. H. F. C
Lloyd, Maj. Guy (Renfrew, E.)
Spens, Sir Patriok (Kensington, S.)


Crosthwaite-Eyre, Col. O. E.
Lloyd, Rt. Hon. Selwyn (Wirral)
Stanley, Capt. Hon. Richard


Crouch, R. F.
Lockwood, Lt.-Col. J. C.
Stevens, G. P.


Darling, Sir William (Edinburgh, S.)
Longden, Gilbert (Herts, S.W.)
Steward, W. A. (Woolwich, W)


Davies, Rt. Hn. Clement (Montgomery)
Lucas. Sir Jocelyn (Portsmouth, S.)
Stewart, Henderson (Fife, E.)


Deedes, W. F.
Lucas, P. B. (Brentford)
Stoddart-Scott, Col. M.


Digby, S. Wingfield
Lucas-Tooth, Sir Hugh
Storey, S.


Dodds-Parker, A. D.
Macdonald, Sir Peter (I. of Wight)
Strauss, Henry (Norwich, S.)


Donaldson, Cmdr. C. E. McA.
Mackeson, Brig. H. R.
Stuart, Rt. Hon James (Moray)


Donner, P. W.
McKibbin, A. J.
Summers, G. S.


Doughty, C. J. A.
McKie, J. H. (Galloway)
Sutcliffe, H.


Douglas-Hamilton, Lord Malcolm
Maclean, Fitzroy
Taylor, Charles (Eastbourne)


Drewe, G.
MacLeod, Rt. Hon. Iain (Enfield, W.)
Taylor, William (Bradford, N.)


Dugdale, Maj. Rt. Hn. Sir T. (Richmond)
MacLeod, John (Ross and Cromarty)
Teeling, W.


Duncan, Capt. J. A. L.
Macpherson, Maj. Niall (Dumfries)
Thomas, Rt. Hon. J. P. L. (Hereford)


Duthie, W. S.
Maitland, Patrick (Lanark)
Thompson, Kenneth (Walton)


Elliot, Rt. Hon. W. E
Manningham-Buller, Sir R. E
Thompson, Lt.-Cdr. R. (Croydon, W.)


Erroll, F J
Marlowe, A. A. H.
Thorneycroft, R. Hn. Peter (Monmouth)


Fell, A.
Marples, A. E.
Tilney, John


Fisher, Nigel
Marshall, Douglas (Bodmin)
Turner, H. F. L


Fleetwood-Hesketh, R. F.
Marshall, Sidney (Sutton)
Turton, R. H.


Fletcher-Cooke, C.
Maude, Angus
Vane, W. M. F.


Fort, R.
Maudling, R.
Vosper, D. F.


Foster, John
Maydon, Lt.-Comdr. S. L. C.
Wakefield, Edward (Derbyshire, W.)


Fraser, Sir Ian (Morecambe &amp; Lonsdale)
Medlicott, Brig. F.
Wakefield, Sir Wavell (Marylebone)


Gage, C. H.
Mellor, Sir John
Walker-Smith, D. C.


Galbraith, Cmdr. T. D. (Pollok)
Moore, Lt.-Col. Sir Thomas
Ward, Miss I. (Tynemouth)


Galbraith, T. G. D. (Hillhead)
Morrison, John (Salisbury)
Wellwood, W.







White, Baker (Canterbury)
Wills, G.



Williams, Rt. Hon. Charles (Torquay)
Wilson, Geoffrey (Truro)
TELLERS FOR THE NOES:


Williams, Sir Herbert (Croydon, E.)
Wood, Hon. R.
Mr. Studholme and Mr. Heath.


Question put, and agreed to.

Division No. 146.]
AYES
[11.23 p.m.


Aitken, W.T.
George, Rt Hon. Maj. G. Lloyd
Oakshott, H. D.


Allan, R. A. (Paddigton, S.)
Godber, J. B.
Odey, G. W.


Alport, C. J. M.
Gough, C. F. H.
O'Neill, Rt. Hon. Sir H. (Antrim, N.)


Amory, Heathcoat (Tiverton)
Graham, Sir Fergus
Ormsby-Gore, Hon. W. D.


Anstruther-Gray, Major W. J.
Grimston, Hon. John (St. Albans)
Orr, Capt. L. P. S.


Arbuthnot, John
Grimston, Sir Robert (Westbury)
Osborne, C.


Ashton, H. (Chelmsford)
Harden, J. R. E
Partridge, E


Assheton, Rt. Hon. R. (Blackburn, W.)
Hare, Hon. J. H.
Peto, Brig. C. H. M


Astor, Hon. J. J. (Plymouth, Sutton)
Harris, Frederic (Croydon, N.)
Peyton, J. W. W.


Baldock, Lt.-Cmdr. J. M
Harvey, Air Cdre. A. V. (Macclesfield)
Pickthorn, K. W. M.


Baldwin, A. E.
Harvie-Watt, Sir George
Pilkington, Capt. R A


Barber, A. P. L.
Heald, Sir Lionel
Pitman, I. J.


Baxter, A. B.
Heath, Edward
Powell, J. Enoch


Beach, Maj. Hicks
Higgs, J. M. C.
Prior-Palmer, Brig. O. L.


Bell, Philip (Bolton, E.)
Hinchingbrooke, Viscount
Raikes. H. V.


Bennett, F. M. (Reading, N.)
Hollis, M. C.
Rayner, Brig. R.


Bennett, William (Woodside)
Hornsby-Smith, Miss M. P
Redmayne, E.


Bevins, J. R. (Toxteth)
Horobin, I. M.
Renton, D. L. M.


Birch, Nigel
Howard, Gerald (Cambridgeshire)
Roberts, Peter (Heeley)


Bishop, F. P.
Hudson, Sir Austin (Lewisham, N.)
Robinson, Roland (Blackpool, S.)


Black, C. W.
Hudson, W. R. A. (Hull, N.)
Roper, Sir Harold


Bossom, A. C.
Hurd, A. R.
Ropner, Col. Sir Leonard


Boyd-Carpenter, J. A
Hutchinson, Sir Geoffrey (Ilford, N.)
Russell, R. S.


Boyle, Sir Edward
Hutchison, Lt.-Com. Clark (E'b'rgh W)
Salter, Rt. Hon. Sir Arthur


Brains, B. R.
Jenkins, R. C. D. (Dulwich)
Schofield, Lt.-Col. W. (Rochdale)


Brooke, Henry (Hampstead)
Johnson, Eric (Blackley)
Scott, R. Donald


Brooman-White, R. C.
Jones, A. (Hall Green)
Scott-Miller, Cmdr. R.


Buchan-Hepburn, Rt. Hon. P. G. T.
Johnson-Hicks, Hon. L. W.
Simon, J. E. S. (Middlesbrough, W.)


Bullard, D. G.
Kaberry, D.
Smithers, Peter (Winchester)


Bullus, Wing Commander E. E.
Keeling, Sir Edward
Spearman, A. C. M.


Burden, F. F. A.
Lambert, Hon. G.
Spence, H. R. (Aberdeenshire, W.)


Butler, Rt. Hon. R. A. (Saffron Walden)
Lambton, Viscount
Spens, Sir Patrick (Kensington, s.)


Carr, Robert (Mitcham)
Lancaster, Col. C. G.
Stanley, Capt. Hon. Richard


Churchill, Rt. Hon. W. S.
Legge-Bourke, Maj. E. A. H.
Stevens, G. P.


Clarke, Col. Ralph (East Grinstead)
Legh, P. R. (Petersfield)
Stoddart-Scott, Col. M.


Clarke, Brig. Terence (Portsmouth, W.)
Lloyd, Maj. Guy (Renfrew, E.)
Storey, S.


Conant, Maj. R. J. E.
Lockwood, Lt.-Cot. J. C.
Strauss, Henry (Norwich, S.)


Cooper-Key, E. M.
Longden, Gilbert (Heels, S.W.)
Stuart, Rt. Hon. James (Moray)


Craddock, Beresford (Spelthorne)
Lucas, Sir Jocelyn (Portsmouth, S.)
Studholme, H. G.


Crookshank, Capt. Rt. Hon. H. F. C.
Lucas, P. B. (Brantford)
Summers, G. S.


Crosthwaite-Eyre, Col. O. E.
Lucas-Tooth, Sir Hugh
Taylor, Charles (Eastbourne)


Crouch, R. F.
Macdonald, Sir Peter (I. of Wight)
Teeling, W.


Cuthbert, W. N.
Mackeson, Brig. H. R.
Thomas, Rt. Hon. J. P. L. (Hereford)


Darling, Sir William (Edinburgh, S.)
McKibbin, A. J.
Thompson, Kenneth (Walton)


Deedes, W. F.
McKie, J. H. (Galloway)
Thompson, Lt.-Cdr. R. (Croydon, W.)


Dodds-Parker, A. D.
Maclean, Fitzroy
Thorneycroft, Rt. Hn. Peter (Monmouth)


Donaldson, Cmdr. C. E. McA.
MacLeod, Rt. Hon. lain (Enfield, W.)
Tilney, John


Donner, P. W.
MacLeod, John (Ross and Cromarty)
Turner, H. F. L.


Douglas-Hamilton, Lord Malcolm
Macpherson, Maj. Hiatt (Dumfries)
Vane, W. M. F.


Drewe, C.
Manningham-Buller, Sir R. E.



Duncan, Capt. J. A. L.
E. Marples, A. E.
Wakefield, Edward (Derbyshire, W.)


Duthie, W. S.
Marshall, Douglas (Bodmin)
Wakefield, Sir Wavell (Marylebone)


Elliot, Rt. Hon. W. E.
Marshall, Sidney (Sutton)
Walker-Smith, D. C.


Erroll, F. J.
Maude, Angus
Ward, Miss I. (Tynemouth)


Fell, A.
Maudling, R.
Waterhouse, Capt. Rt. Hon. C.


Finlay, Graeme
Maydon, Lt.-Comdr. S L C.
Wellwood, W.


Fisher, Nigel
Medlicott, Brig. F.
White, Baker (Canterbury)


Fleetwood-Hesketh, R. F.
Mellor, Sir John
Williams, Sir Herbert (Croydon, E.)


Fletcher-Cooke, C.
Morrison, John (Salisbury)
Wilson, Geoffrey (Truro)


Fraser, Hon. Hugh (Stone)
Nabarro, G. D. N.
York, C.


Fraser, Sir Ian (Morecambe &amp; Lonsdale)
Nicholson, Godfrey (Farnham)



Gage, C. H.
Nicolson, Nigel (Bournemouth, E.)
TELLERS FOR THE NOES:


Galbraith, Cmdr. T. D. (Pollok)
Noble, Cmdr. A. H. P.
Mr. Butcher and Mr. Vosper.


Galbraith, T. G. D. (Hillhead)
Nugent, G. R. H.





NOES


Adams, Richard
Broughton, Dr. A. D. D.
Davies, A. Edward (Stoke, N.)


Albu, A. H.
Burke, W. A.
Davies, Ernest (Enfield, E.)


Allen, Arthur (Bosworth)
Burton, Miss F. E.
Davies, Stephen (Merthyr)


Attlee, Rt. Hon. C. R.
Butler, Herbert (Hackney, S.)
Deer, G.


Awbery, S. S.
Callaghan, L. J.
Delargy, H. J.


Balfour, A.
Castle, Mrs. B. A.
Dodds, N. N.


Barnes, Rt. Hon. A. J.
Champion, A. J.
Donnelly, D. L.


Bellanger, Rt. Hon. F. J.
Chapman, W. D
Driberg, T. E. N.


Bence, C. R.
Clunie, J.
Dugdale, Rt. Hon. John (W. Bromwich)


Benn, Wedgwood
Coldrick, W.
Ede, Rt. Hon. J. C.


Benson, G.
Collick, P. H.
Edwards, John (Brighouse)


Bevan, Rt. Hon. A. (Ebbw Vale)
Corbet, Mrs. Freda
Evans, Albert (Islington, S.W.)


Blackburn, F.
Cove, W. G.
Evans, Stanley (Wednesbury)


Blyton, W. R.
Craddock, George (Bradford, S.)
Ewart, R.


Boardman, H.
Crosland, C. A. R.
Fernyhough, E.


Brockway, A. F.
Cullen, Mrs. A.
Field, W. J.


Brook, Dryden (Halifax)
Dalton, Rt. Hon. H.
Fienburgh, W.







Fletcher, Eric (Islington, E.)
Keenan, W.
Shawcross, Rt. Hon. Sir Hartley


Forman, J. C.
Lee, Frederick (Newton)
Shurmer, P. L. E.


Fraser, Thomas (Hamilton)
Lindgren, G. S.
Silverman. Julius (Erdington)


Freeman, John (Watford)
Logan, D. G.
Simmons, C. J. (Brierley Hill)


Freeman, Peter (Newport)
MacColl, J. E.
Slater, J.


Gaitskell, Rt. Hon. H T N.
McGhee, H G.
Sorensen, R. W.


Gibson, C. W.
McInnes, J.
Soskice, Rt. Hon. Sir Frank


Glanville, James
McKay, John (Wallsend)
Steele, T.


Greenwood, Anthony (Rossendale)
MacPherson, Malcolm (Stirling)
Stewart, Michael (Fulham, E.)


Grenfell, Rt. Hon. D. R.
Mallalieu, J. P. W. (Huddersfield, E.)
Stokes, Rt. Hon. R. R.


Grey, C. F.
Manuel, A. C.
Strachey, Rt. Hon. J.


Griffiths, David (Rather Valley)
Marquand, Rt. Hon. H. A.
Swingler, S. T.


Griffiths, Rt. Hon. James (Llanelly)
Mikardo, Ian
Sylvester, G. O.


Griffiths, William (Exchange)
Mitchison, G. R.
Taylor, Rt. Hon. Robert (Morpetn)


Grimond, J.
Monslow, W.
Thomas, David (Aberdare)


Hale, Leslie (Oldham, W.)
Moody, A. S.
Thomas, Ivor Owen (Wrekin)


Hall, John (Gateshead, W.)
Morgan, Dr. H. B. W.
Thurtle, Ernest


Hannan, W.
Moyle, A.
Tomney, F.


Hargreaves, A.
Mulley, F. W.
Ungoed-Thomas, Sir Lynn


Harrison, J. (Nottingham, E.)
Noel-Baker. Rt. Hon. P. J
Usborne, H. C.


Hayman, F. H.
O'Brien, T
Wallace, H. W.


Henderson, Rt. Hon. A. (Rowley Regis)
Oliver, G. H.
Watkins, T. E.


Herbison, Miss M
Oswald, T.
Weitzman, D.


Hobson, C. R.
Padley, W. E.
West, D. G.


Holman, P.
Paling, Rt. Hon. W. (Dearne Valley)
Wheatley, Rt. Hon John


Houghton, Douglas
Porter, G.
White, Henry (Derbyshire, N. E.)


Hoy, J. H.
Price, Joseph T. (Westhoughton)
Wigg, George


Hudson, James (Ealing, N.)
Price, Philips (Gloucestershire, W.)
Wilkins, W. A.


Hughes, Cledwyn (Anglesey)
Proctor, W. T.
Williams, Ronald (Wigan)


Hynd, J. B. (Attercliffe)
Pryde, D. J.
Wiliams, W. T. (Hammersmith, S.)


Irving, W. J. (Wood Green)
Pursey, Cmdr. H.
Wilson, Rt. Hon. Harold (Huyton)


Janner, B.
Reid, Thomas (Swindon)
Winterbottom, Richard (Brightside)


Jay, Rt. Hon. D. P. T.
Rhodes, H
Wyatt, W. L.


Jeger, Dr. Santo (St. Pancras, S.)
Richards, R.
Yates, V. F.


Jenkins, R. H. (Stechford)
Roberts, Albert (Normanton)
Younger, Rt. Hon. K.


Johnson, James (Rugby)
Robinson, Kenneth (St. Pancras, N.)



Jones, David (Hartlepool)
Royle, C.
TELLERS FOR THE NOES:


Jones, Jack (Rotherham)
Schofield, S. (Barnsley)
Mr. Pearson and Mr. Horace Holmes.


Jones, T. W. (Merioneth)
Shackleton, E. A. A.

Clause 54.—(APPEALS.)

Mr. Mitchison: I beg to move, in page 57, line 43, after "thirty-five," to insert "section forty."
In one sense this is not a large point, but it is of some importance. It would be convenient to refer to the Amendment which seeks to introduce specifically reference to the Ninth Schedule. The point is that these appeals are either to the General Commissioners or to the Special Commissioners, but the proviso at the end of the Clause makes certain matters specially appealable to the Special Commissioners only and not to the General Commissioners. That, presumably is because they are matters of some complexity and difficulty and, for that reason, it was thought more appropriate that the appeal should lie in that way.
The Ninth Schedule is introduced by Clause 40. I should be out of order if I were to discuss that Schedule in detail. What it deals with appears from Clause 40 to be the complicated question of what are undistributed profits or what is over-distribution of profits for an accounting period. It is a long Schedule. In some ways it is rather unfortunate—it is the procedure which has been adopted—that I have to deal with the Clause incorporating the Schedule and not with the Schedule itself.
Clause 54 deals in this way with the whole of the Tenth and Eleventh Schedules and with part of the Eighth Schedule. I should like to know why the Ninth Schedule has been left out. All these Schedules are long and complicated. They deal with matters of considerable difficulty and importance. I should have thought that it would have been advisable to have kept, as far as possible, to a single appeals body for all of them.
I see no reason why this Schedule should be left out and this difficult question of undistributed profits and over-distribution of profits regarded as within the competence of the General Commissioners of appeal while other questions hardly more complicated are reserved for

the Special Commissioners. It is an illustration of the extremely cumbersome and complicated nature of this tax that there have to be these elaborate provisions for appeal under it. I suggest that, at least, they should be similar in all these cases on this complicated point.

The Solicitor-General: I understand that the purpose of the Amendment is to bring appeals relating to the computation of undistributed profits and over-distribution of profits under Clause 40 and the Ninth Schedule before the Special Commissioners instead of before the General Commissioners. The hon. and learned Member for Kettering (Mr. Mitchison) expressed his concern that a provision of this sort was not already in the Bill. I can explain the principles on which the Bill is drawn in deciding whether an appeal should be to the General Commissioners or the Special Commissioners.
There are really two principles. First, the appeals to the Special Commissioners are restricted to the cases where the questions at issue involve two or more concerns whÌch may be located in different parts of the country. It is essential that the disputes should go before the same tribunal, and that one tribunal should adjudicate upon them.
The other principle is that where we have points of considerable complexity, such as the special percentages granted under Clause 47 and the spreading of profits from long-term contracts, it is thought essential to secure consistency of treatment throughout the country by having the appeal to the Special Commissioners.
With regard to the over-distribution of profits and undistributed profits, the rules laid down in the Ninth Schedule are comparatively—I emphasise the word "comparatively"—straightforward. I am advised that there is no reason to provide for them to be dealt with solely by the Special Commissioners. The rules laid down in the Schedules will involve questions of computation of profits and additions and subtractions. I regret that we are unable to accept the Amendment.

Mr. Mitchison: Does the Solicitor-General tell the Committee, not on advice he has received but on his own expert knowledge of these matters, that the Ninth Schedule is purely a matter of computation, when it takes four pages of type to set out what it is all about; and that the question of the over-distribution of profits or undistributed profits is as simple as that? Does he not realise the extreme inconvenience of having appeals on some of these matters to the General Commissioners, and having appeals on matters which are not very different incapable of being brought to the General Commissioners?

The Solicitor-General: We have given consideration to this matter. Compared with the other Schedules, the Ninth Schedule is comparatively simple. It comes to a question of applying the standards laid down there and to a matter of computation. We think that it is right that appeals in relation to these matters should go to the General Commissioners.

Mr. Mitchison: In the circumstances, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

The Solicitor-General: I beg to move, in page 57, line 44, after "forty-seven," to insert:
section (Computation of profits for purposes of excess profits levy in the case of concerns producing certain metals, etc.)".
This Amendment is consequential on the new Clause which the Chancellor has put down to give a measure of relief from the Excess Profits Levy to certain firms operating metal mines, oil wells or the extraction of asbestos where in the national interest it is essential to increase output. It is thought desirable for consistency of treatment that appeals should go to the Special Commissioners.
Amendment agreed to.

7.0 p.m.

Mr. Erroll: I beg to move, in page 58, to leave out lines 6 to 11.
This Amendment seeks to leave out paragraph (ii) of the proviso to subsection (1). The paragraph makes two points, the first relating to apportionment and the second to decisions. The paragraph says:
no apportionment as respects which a right of appeal is given by any other provision of this Act and no decision of the Commissioners

on any matter which, under any provision of this Act, is left to their discretion, shall be balled in question on any appeal under this subsection.
The point of the Amendment is that it seeks to make any apportionment or discretion of the Commissioners in regard to this particular Part of the Finance Bill subject to appeal. There is no gainsaying the fact that the E.P.L. provisions of the Bill have been drafted hurriedly and rapidly. It is quite well recognised that they are such complicated Clauses that they must have been conceived hurriedly, because the Government have only a month or two in which to do it.
Therefore, it seems quite understandable that, in other parts of the Bill, there should be arrangements made whereby the Commissioners should decide; that is quite all right. We know that the Commissioners are, by and large, fair-minded people, and, for the sake of speed, it is only proper that they should have the right to make decisions. What is surely wrong is that their decisions and apportionments under E.P.L. should be unappealable.
In effect, it means that any junior officer in a tax inspector's department may make a decision against which there is no right of appeal of any sort at all. He will, of course, make the decision to the best of his ability, but it does seem wrong that, where streamlining provisions are made whereby the Commissioners may decide, there should be no right of appeal whatever. All my Amendment would do would be to make it possible for apportionments and decisions relating to E.P.L. to be subject to appeal.

The Solicitor-General: My hon. Friend will, I am sure, appreciate that Clause 54 deals with appeals against assessments and the determinations of the Commissioners in respect of relief. The second part of the proviso to subsection (1) is meant to avoid the difficulty of having two separate rights of appeal. If my hon. Friend will look at Clause 35, which deals with apportionments on a minimum standard between two or more companies under common control, he will see that there is there an express right of appeal to the Special Commissioners under subsection (4). If that right is exercised and the matter is determined, it would appear to be wrong then to allow the matter to be raised again on an appeal against


assessment. That deals with the first part of the matter, contained in lines 6 and 7.
I think that the part about which my hon. Friend feels most concerned is the fact that the Clause as it stands provides that there should be no appeal under this subsection in respect of matters left in the Commissioners' discretion. May I say straight away, of course, there is the right of appeal, apart from this subsection, on any question of law. There is no exclusion of that. The matters which are left to the Commissioners' discretion are really matters of machinery in dealing with the formalities of the assessment, and I have here particulars of the various instances in which they have a discretion, and I would like shortly to indicate what they are.
If we look at Clause 35 (3), which deals with the chargeable accounting periods of two or more companies, we see that the Commissioners have a discretion there so to adjust the period as to arrive at the right result. It is purely a question of assessment machinery, and the only effect of giving a company a right of appeal on that matter would be to encourage the company to waste the time of the Appellate Commissioners in order to avoid payment of its just liabilities.
Another instance is found in Clause 36 (4), which is concerned with the matter of the machinery as to deficiencies and the question whether there is a break in continuity. There, it is merely a matter of apportionment of profits for the chargeable accounting period which is left to the discretion of the Commissioners. There is a right of appeal in law, and there are also two instances in Clauses 39 and 40 of a similar character. There is another in Clause 42, where the Commissioners have a discretion in fixing the period to be taken as the chargeable accounting period where there has been a transfer of business from one company to another. There are several provisions in the Bill giving the Commissioners discretion to allow a longer period than that specified in the Bill.
That, I think, summarises the matters on which the Commissioners can exercise their discretion. From the exercise of that discretion in these machinery matters, there is, it is true, no appeal, but there is appeal on a matter of taw. Similar powers have

been given to the Commissioners in the past for the purposes of the Profits Tax and the Excess Profits Tax. They are all matters of machinery, and there is really nothing new about them. In the circumstances, I hope that the justifiable anxiety of my hon. Friends as to the effect of this provision will now be dispelled.

Mr. P. Roberts: I am much happier now, after the Solicitor-General has spoken, than I was before, but am I not right in thinking that there are a number of these discretions in the Eighth and Ninth Schedules which the learned Solicitor-General has not actually enumerated?

The Solicitor-General: My hon. Friend is quite right. I ought to have mentioned that, but I thought I had covered them all. These, too, are purely machinery matters.

Mr. Roberts: These discretions given here are far more numerous than have in the past been included in Finance Bills. I do not think that any of my hon. Friends on this side want to suggest that opportunity should be given for frivolous litigation, but cases may arise in which people may feel that they have been genuinely aggrieved.
The question I should like him to consider whether he could not find a form of words whereby any application deemed to be frivolous could bring an order for costs, or what you will, against the applicant, in order to give the genuine cases at least a chance of the appeal being heard. I do not like a principle being incorporated in the Clause taking away the right of appeal of an individual or company.
Although I appreciate that it may really be a question of machinery, it is also a question of principle, into which I should like my hon. and learned Friend to look again to see whether he can devise some form of words to meet what we are trying to do and also the point which he made himself about frivolous applications. If he could make a short reply on those matters, I think it would help us.

The Solicitor-General: I do not say that the removal of the right of appeal is solely to deal with frivolous applications. I think it is right that the precedents of the past should be followed in


this Bill in deliberately leaving certain matters to the discretion of the Commissioners in respect of adjustment of the chargeable accounting period of a number of companies which are grouped together.
I think one can leave that kind of machinery to arrive at the right mathematical conclusions to the discretion of the Commissioners without any anxiety at all. If they went wrong in law and applied a wrong principle there is still an appeal, and that surely should suffice. I hope I have been able to allay any anxiety over that. I do not feel confident that, with whatever ingenuity I possess, I would be able to devise an Amendment on the lines suggested to enable there to be an appeal in appropriate cases which would not also have the effect of impeding the operation of the Bill.

Mr. P. Roberts: I would advise my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) to withdraw the Amendment. I could see the shade of the Financial Secretary when he was sitting on the benches opposite rising on matters concerning the liberty of the individual. It was only memories of those occasions that made me rise in my place to suggest to the Front Bench that they should remember the principle that we have always maintained—that the individual should have the right of appeal in cases of hardship.

Mr. Erroll: My anxieties are not entirely allayed, because very important discretion is granted under Clause 39 to the Commissioners in dealing with the computation of profits or losses for any individual company. I should have thought that there should have been a right of appeal in that case but, in view of the assurances now given, I beg to ask leave to withdraw the Amendment.

Hon. Members: No.

Amendment negatived.

Clause, as amended, ordered to stand part of the Bill.

Clause 55.—(RETURNS AND PARTICULARS, ETC.)

Sir F. Soskice: I beg to move, in page 58, line 33, after "period," to insert:
(not being a period which expired more than ten years before the period of charge to the excess profits levy).

Subsection (1) of this Clause gives the surveyor power by notice in writing to require a trader to make a return of the profits or losses of his trade or business for any period during which it was carried on by him. Now, prima facie those words seem to relate to any period as from the year 1. It may be that the Solicitor-General can refer me to a provision which imports a limitation on the time backwards for which the return may be required, but, so far as I can see, in the Clause there is no limitation in time at all.
I should like to make it perfectly clear that, so far as I am concerned, I think the Inland Revenue authorities should have the fullest and amplest powers to furnish themselves with the information they require for the purposes of assessing the liability of the taxpayer and exacting the tax from him when he is assessed. Indeed, the Solicitor-General may have noticed that there is a new Clause on the Order Paper which deals with entertainment expenses and that sort of thing in which we on this side of the Committee seek to give powers to the assessing authorities to furnish themselves with information which at present is beyond their reach. I am entirely in favour of that.
On the other hand, it seems to me that. whether unintentionally or not, the Government are perhaps asking for a little bit too much in this subsection. I do not know what is the earliest established trade at present being carried on in this country. I suppose that some of the insurance companies and some other companies go back many hundreds of years. On its true reading—unless I have omitted to notice some other provision either in this Bill or in some other Act to which it refers or which it incorporates—prima facie I suppose the surveyor could ask many of the great insurance companies who have been carrying on business for many years past to furnish particulars of their trade 200 years ago. I am sure that is not intended by the Government. Alternatively, if it is, I should like to hear from their spokesman that that is the case.
7.15 p.m.
In the meantime, in this Amendment, I and my hon. Friends have sought to import a limit of 10 years before the period of charge, which the hon. and learned Gentleman has defined in the


Bill as the period beginning on 1st January, 1952. I should have thought the Government probably would have taken sufficient power if they had enabled themselves to ask a company whom they sought to assess for Excess Profits Levy for a return in respect of trading losses or profits for a period going back as far as 10 years ago from 1st January, 1952. If there are reasons that make it desirable to go back 20, 30, 40 or 50 years I am sure my hon. Friends and the Committee as a whole would like to know those reasons.
It may very well be that the Government can make out a case for seeking such extensive powers as they do. Sometimes the terms "snoopers" and "snooping" have been applied to some of my hon. Friends and some of the Measures we have introduced. They are terms which were misused in that connection. But I am not sure that they would be misused in this context if the reading which I suggest is the appropriate reading is, in fact, the right one. As I say, it may be the wrong one.
I and my hon. Friends have put down the Amendment with a view, in the first place, of trying to ascertain whether there is something we have overlooked; secondly, assuming there is not, to ascertain precisely what the desires of the Government are, and, if they desire to be enabled to ask for information 50 years late, why they want to know information going as far back as all that. There may be a perfect reason. If there is not, I suggest they would be adequately safeguarded in their attempts to assess the tax if they are enabled to ask for a return for a period of 10 years.
It may be that this is a precedent from other Acts and there may be some limit imported by implication from some other source. If there is, I would put to the Solicitor-General the consideration behind our Amendment that he might be content with information extending back 10 years before the period of charge. In any case, I ask him to be good enough to apply his mind to the matter, to explain the reasons for the Clause in the form in which it appears on the Order Paper, and to give his reaction to our Amendment.

The Solicitor-General: The origin of this Clause is the precedent in the first paragraph of Part 3 of the Fifth Schedule

of the Finance Act, 1927, which was extended to apply to war-time Excess Profits Tax by Section 21 (2) of the Finance (No. 2) Act, 1939. That is the precedent; but I am going to deal with what the right hon. and learned Gentleman the Member for Sheffield, Neepsend (Sir F. Soskice), has said, not basing my answer to him solely upon the precedent.
The right hon. and learned Gentleman said he is in favour—and I think all the Committee are—of commissioners and surveyors having the fullest powers to obtain all proper information for securing proper assessment of the Excess Profits Levy. I do not suppose that a surveyor will ever require information for 40 or 50 years ago. But the difficulty is in fixing a precise period for the reason that, for instance, one has to consider not only the returns of profits arising in periods comprised of, or partly included in the standard period, but returns as profits for the Excess Profits Levy period as well.
One has to consider the spreading of profits from long-term contracts. The right hon. and learned Gentleman's proposal takes us back 10 years from Ist January, 1952; that is to say, it only goes back five years before the first of the standard years. It might be that in one or two cases—though I do not suppose it would be many—one might want to go back further than that.
The difficulty is to limit it so as to enable the Revenue to get the information they are entitled to have and, at the same time, to prevent any possible abuse of their powers. In that connection I think it is worth bearing is mind that there has been no criticism of the exercise of their powers under a similar section in the 1939 Act. I am not aware of any criticism, I do not know whether the right hon. and learned Gentleman is.
I am fully apprised of the point made by the right hon. and learned Gentleman and if he will withdraw his Amendment I will certainly consider, between now and the Report stage, whether it is possible to redraft this part of the Clause so as to ensure that the Revenue have the powers they want—and which the right hon. and learned Gentleman wants them to have—and, at the same time, have not got powers to go back for 100 or 150 years. It may be that one would have to do that without any specific reference


to a period of years. I think that it may be possible to do it and, in the hope that it is—though I cannot promise anything —I ask the right hon. and learned Gentleman to withdraw his Amendment so that we can make further progress.

Mr. Austen Albu: Before my right hon. and learned Friend answers the Solicitor-General, I must say that we feel that it has certainly been worth while putting down this Amendment and drawing from the Solicitor-General the statement which he has just made, because it is quite clear that these particular and possibly exaggerated precautions have been overlooked.
We are rather glad to see that the precedents for this Clause are contained in the Conservative Party Acts of 1937 and 1939. In future, when we are sitting on those benches, I hope that we shall not be accused of snooping when we put into Bills of this or any other type Clauses designed purely for the purpose of enabling necessary information to be obtained.
I hope that the Solicitor-General will bear in mind that there are good reasons for putting down this Amendment. After all, the period we have suggested goes back only five years before the standard period. It might be a little short, and I agree that we might want a rather longer period; but many things can happen in the life of a company. Documents may be lost. All companies are not very good at keeping documents, and this period includes the war period, in which a large number of documents were lost in bombing, so that it might be difficult to reconstruct the information. Another reason is that the form of computation of profits over a period of years has no doubt changed in conformity with changes in taxation legislation. To go back for a longer period might create very great difficulties for companies in trying to reconstruct their profit figures.
As the Solicitor-General has made this offer I do not suppose that my right hon. and learned Friend will want to press the matter to a Division; but I think it is a warning to hon. Members opposite—particularly the hon. Member for Heeley (Mr. P. Roberts) who made such an impassioned plea about snooping—that

they must be careful not to make accusations when we require, in future legislation, enactments which are necessary purely to ensure that that legislation can be implemented.

Mr. Jay: Will the hon. and learned Gentleman assure us that, in the course of his deliberations before the Report stage, he will consult the hon. Member for Orpington (Sir W. Smithers), who has taken a great interest in the subject of snoopers?

Mr. Mitchison: I should like to make a short appeal to the Solicitor-General. I do not think that he has any idea how mischievous and troublesome is the mere accumulation of ancient records. The effect of this kind of legislation is to make people keep documents which they' would not otherwise have kept. It is bad for them; it is bad for those who work for them, and it is bad for the waste paper merchants, who ought to be encouraged to use these documents for a better purpose.

The Solicitor-General: I have listened with interest to the hon. and learned Member for Kettering (Mr. Mitchison), but I am sure he is aware that one of the places which collects the most valuable old records is in his own constituency.

Mr. Mitchison: It is no good collecting records. This Government will not allow them to be shown to the public. The point is that we should be getting rid of waste paper.

Sir F. Soskice: I am grateful to the hon. and learned Gentleman for the answer he has given and for the undertaking that he will think further about this matter. In view of what he has said I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

The Solicitor-General: I beg to move, in page 58, line 38, at the end, to insert "trade or."
This is a purely drafting Amendment. The words "trade or" were omitted by an oversight from the original draft.

Mr. Callaghan: I should like to ask a question for the purpose of clarification. None of us likes to put unnecessary words into Bills of this sort, and I remember


the very powerful speeches which were made by the hon. and learned Gentleman in the last Parliament; but what is the difference for Income Tax purposes, between a trade and a business which necessitates the adding of these words?

The Solicitor-General: I think the hon. Member will find that in Income Tax Acts these words are nearly always in conjunction. There have been a good many legal decisions on this particular part of the Income Tax Acts and it might lead to great complications if we found "business" without "trade or." If the hon. Gentleman desires it, I will certainly draw his attention to various passages in the text-books.
Amendment agreed to.

The Solicitor-General: I beg to move, in page 59, line 21, to leave out from "Section," to "(which," and insert "five hundred and four of the Income Tax Act. 1952."
This Amendment corrects a drafting error. Section 34 of the Finance Act, 1942, was repealed, as from the year 195253, by the Income Tax Act, 1952, and it is replaced by Section 504 of that Act.
Amendment agreed to.
Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Mr. Mitchison: There are some words here for which I believe there are abundant precedents, and they are these:
…any oath taken by any such person"—
that is to say—
All Commissioners and other persons employed for any purpose in connection with the assessment or collection"—
of this tax—
…as to secrecy with respect to Income Tax shall be deemed to extend also to secrecy with respect to the excess profits levy.
7,30 p.m.
I believe that there are quite a number of precedents for this iniquitous piece of legislation, but it is too much that we should go on enacting this kind of thing. I wonder how many times the Solicitor General has said to a witness in the box, "Remember, you are on oath." I wonder how many times we have had to rise on some occasion or another in due and proper respect for an oath taken. I wonder how many times we have been reminded, not only in the ordinary course

of life in this country but in other ways, that there still is, or ought to be, some respect for the sanctity of an oath.
What is being done in this case is simply this: a large body of public servants, who have been duly sworn to secrecy with respect to Income Tax, suddenly find that, by an Act of this House, that solemn and personal obligation is transferred to another field and they are deemed to have sworn that they will keep secrecy on a different matter. I am not in the least objecting to the secrecy, which I think is only right and proper. I am not in the least objecting to that secrecy being enforced and giving the sanction of an oath. What I am objecting to is that, when an oath has been taken on one matter, we presume to extend that high personal obligation to something different. I suppose the reason is that it is more convenient to do it in this way.
The Government are, of course, engaged on an economy campaign, but could not they possibly spare the time and the money to swear in these gentlemen again and to maintain some kind of respect for this sort of obligation? I should have thought that the Tory Party would be the last people to sanction this practice. I know that this has been done before, but we can go on doing this kind of thing until the moment comes when we look round and say, "Look what we are doing; is it not time we stopped?" I ask the right hon. and hon. Gentlemen opposite to consider whether it is not about time that they stopped. If they do, they will maintain the individual obligation, the sanctity and the sanction of an oath at the expense of a little time and trouble—if they like, a little public time, too, in re-swearing a number of civil servants and others. Surely it is worth it.
If we are to use the oath in our courts in the way that we intend, and if in our other affairs we use it as we intend, then surely the sanctity and solemn obligation of an oath is worth something. I am sorry that an Amendment to this effect was not called, but I feel justified in asking whoever is to reply to take the opportunity of doing the right thing at long last and of removing these iniquitous words on the Report stage.

Mr. Maudling: I also regret that the Amendment in the name of the hon. Member for Stechford (Mr. Roy Jenkins), 

the speech for which has been made by the hon. and learned Member for Kettering (Mr. Mitchison) on the Question that the Clause stand part of the Bill, was not called, because it was my right hon. Friend's intention to accept it. It is quite true that the words "and any oath" are not appropriate in this context and are not necessary, and my right hon. Friend will be glad to take the appropriate steps on Report Stage to remove them.
If I am asked why they were inserted in the first place, the answer is that they were taken from the latest precedent when a new tax was introduced—Section 67 of the Finance Act of 1948, which imposed the Special Contribution.

Mr. Douglas Houghton: Does the hon. Gentleman's answer mean that it is proposed to swear the whole of the Inland Revenue Department in order that the oath may also cover secrecy on matters coming to their notice under the Excess Profits Levy?

Mr. Maudling: I have not the knowledge of the hon. Member for Sowerby (Mr. Houghton) on these affairs, but I am given to understand that the question of an oath does not arise. It is a question of a declaration. If the words "and any oath" are excluded from the Clause, as hon. Members wish, then the same obligation of secrecy will apply in respect of the levy as applies in connection with the Income Tax. The declaration—and it is not an oath—will be effective for the purposes of the Excess Profits Levy.

Mr. Mitchison: May 1 thank the hon. Gentleman for the undertaking he has so kindly given?

Clause, as amended, ordered to stand part of the Bill.

Clause 56.—(EXTENSION OF EXCESS PROFITS LEVY TO UNINCORPORATED SOCIETIES AND OTHER BODIES.)

Mr. Boyd-Carpenter: I beg to move, in page 59, line 32, after "in," to insert:—
the Schedule (Excess Profits Levy: computation of value of assets and liabilities for purposes of capital standard) and.
This is consequential upon my right hon. Friend's proposal of a net assets standard as an alternative standard. It

is connected with the new Schedule on page 1545 of the Order Paper.
Amendment agreed to.
Motion made, and Question proposed, "That the Clause, as amended, stand part of the Bill."

Mr. Ronald Williams: We ought not to part with this Clause until we have asked a few questions and received an answer from, I sincerely hope, the Solicitor-General. At long last he has an opportunity to give something away and to give it with grace and, on this occasion I hope, with enthusiasm. I know that I must avoid going into the details of an Amendment which has not been called, but I think I am entitled to put it to the Solicitor-General that the effect of this Clause is to extend the Excess Profits Levy to "unincorporated societies and other bodies." There is a very clear proviso to the Clause which excludes partnerships. We can keep out of our minds for the purposes of the Clause partnerships and incorporated bodies.
The Clause deals with unincorporated societies, which are entities well known to the law, and also with "other bodies." What on earth are "other bodies"? The term is not defined in the Bill at all, and the fact that it is included in the Clause goes far to vitiate the effect of the Clause by introducing an undefined term which, as far as I know, has not been noticid judicially and which must leave hon. Members in grave doubt as to its meaning. I do think that we are entitled to an explanation of the form of association or body other than a partnership which it is intended shall be included in this term.
The words are very difficult indeed to understand even if one places them in the ejusdem generic sector—and I concede at once that the words are not quite as wide as they at first sight appear; but even if one does that, if even the words are construed as if they meant other similar bodies, I think the Committee is entitled to have an explanation from the Solicitor-General or the Financial Secretary as to what they have in mind. If they have no particular bodies in mind at all then this—and I say this in the most charming way I can—is the most preposterous way to express it; but if they have specific cases in mind, surely it


would be appropriate for them to specify those cases or to have a definition Clause which would indicate what they have in mind.

Mr. Boyd-Carpenter: I think there is a good deal of force in what the hon. Gentleman the Member for Wigan (Mr. R. Williams) has just said. Like him, I should not be in order in referring to an Amendment which was on the Order Paper but which did not have the good fortune to be selected, but the fact that it was placed on the Order Paper did, fortunately, direct attention specifically to this matter.
As the hon. Member will appreciate, what are covered generally in this Clause are bodies that carry on a trade or business. The words "other bodies" were included, perhaps, out of what the right hon. and learned Gentleman the Member for Neepsend (Sir F. Soskice) would describe as "most abundant caution," to make quite sure that there were no bodies carrying on a trade or business which were not included in the various other specifications. It is a little difficult to find what other bodies there may be and we should like to look further at this matter. There is a great deal of force in what the hon. Gentleman has just said—that either the words should come out or that they should receive definition.
I should not like to commit my right hon. Friend at this stage as to which of those two courses he will be able to adopt at the next stage, but we are looking at this problem with a view to making quite sure that we do not omit bodies which ought to be covered and, equally, that we do not include in the Bill, as it is not our wish, any words which have no particular purpose. We are much obliged to the hon. Gentleman for what he has said.

Sir F. Soskice: I should like, very modestly, to congratulate the Financial Secretary on his answer, which, I thought, was the perfect Parliamentary way of saying he had not the remotest idea of what the answer to the question was. I very greatly envied him his facility in saying, in polished and well-thought-out terms, what, I am afraid, I should have had to say in much more brutal and brief terms.
But I am glad that his attitude of mind—if it is his attitude of mind—is exactly the same as mine. I think that both sides

of the Committee are equally to blame about this form of phrase. I do not believe that anybody knows what is meant by the expression "unincorporated societies and other bodies." I think the Financial Secretary will agree with me that the phrase appears in a number of Acts passed at the instance of predecessors of hon. and right hon. Gentlemen opposite and passed at the instance of my hon. and right hon. Friends on this side of the Committee.
So far as I am aware there is no definition anywhere in any enactment as to what is meant by an "unincorporated society." Does it include a trade union? Nor have I been able to find anything to indicate what is meant, in the various contexts in which these words appear, by the expression "other bodies," and it seems to me to be a form of wording which has just crept into Finance Acts and been periodically repeated without much thought being given to what exactly is meant by it.
7.45 p.m.
Speaking for myself, I am very glad to hear the Financial Secretary say he will carefully look into these words again, because at some time one has to make a start in using words which mean something instead of words that mean almost nothing. I cannot myself think what "unincorporated society" is in this connection.

Mr. Boyd-Carpenter: What is contemplated here are certain old-established building societies which have never been incorporated.

Sir F. Soskice: I am obliged, and I am glad to hear the Financial Secretary say what he has said; and I hope that we can attain some precision in the use of this language in future. I frankly avow that both sides of the Committee are equally to blame for the use of these words.

Clause, as amended, ordered to stand part of the Bill.

Clause 57.—(INTERPRETATION, ETC.)

Mr. Martin Lindsay: I beg to move, in page 60, line 39, after "1948," to insert:
or of any unregistered company being a body corporate incorporated in and having a Principal place of business in Great Britain.


To be on the safe side I should declare that I have a remote, indirect interest in this Clause, in that the beneficiary under this Amendment would be a company which is a shareholder in another of which I happen to be a director. It is because of this connection that the injustice which this Amendment seeks to remove came to my notice.
Subsection (2) discriminates—I dare say, quite unintentionally, and due to a drafting error—between statutory and other companies, because as this Clause is drafted only companies under Section 56 of the Companies Act, 1948. can include their share premium accounts as part of their paid up share capital, and statutory companies are, of course, not subject to Section 56 of the Companies Act, 1948.
Apart from water companies, which are in a special position, since the nationalisation of the gas and electrical companies, there are, I understand, only two statutory companies. The first one of those is not interested in this Amendment, because it intends to take its assessment for the Excess Profits Levy by one of the alternative methods; but the other one is gravely concerned.
I hope that it will not be suggested that this anomaly should be continued because statutory companies are in a different position in regard to share premiums, because, of course, there is no discrimination whatever in taxation arising from the distribution of share premiums by statutory companies in contradistinction from any other company. I therefore hope that the Chancellor will accept this Amendment in order to remove this anomaly, and to extend to the statutory companies—the one statutory company other than water companies—the advantage of Clause 57 of this Bill.

The Solicitor-General: This Clause was drafted in this way for the purpose of eliminating non-resident companies, such as foreign companies with a branch in the United Kingdom, but if there are companies such as those coming within the Amendment moved by my hon. Friend, or, indeed, companies coming within the definition of the Amendment in the name of my hon. and learned Friend the Member for Ilford, North (Sir G. Hutchinson) that has not been called. in page 60, line 38, after "of," to insert:

any company formed under any private Act of Parliament for the purpose of supplying water or of.
having a share premium account although not registered under Section 56 of the 1948 Act, it would not be right that they should be differently treated; and, we certainly will give consideration to their position between now and the Report stage.
I hope that in the circumstances it will not be necessary to go into the ramifications of the water companies or, indeed, of those other companies. We shall, I hope, have a full opportunity of considering their position between now and the Report stage. I hope, therefore, my hon. Friend will withdraw his Amendment.

Sir G. Hutchinson: I shall not detain the Committee for more than a few minutes. I am much obliged to my hon. and learned Friend for what he has said. I would point out to him however that it by no means covers this very important point. As my hon. Friend the Member for Solihull (Mr. M. Lindsay) has said, the most numerous and most important class of company affected by this matter is the statutory water company. Like him, I have to disclose a certain interest in companies which will be affected by these Amendments.
I desire to draw the attention of my right hon. and learned Friend to the fact that statutory water companies are in a special position in this matter because, unlike registered companies, by the terms of their special Acts they are required to issue their capital by tender and they have therefore over the years accumulated substantial share premiums. These share premiums they are required, by their specials Acts, to treat as part of their capital and they have, therefore, no share premium accounts corresponding to the share premium account which registered companies are required to maintain by Section 56 of the 1948 Act.
The two Amendments which stand on the Order Paper in the name of my hon. Friend the Member for Solihull and in my own name do not deal with this particular aspect of the matter. I had an Amendment on the Order Paper at an earlier stage which did deal with it, but it suffered the fate which does sometimes overtake an Amendment—it was not called. I desire now to draw


the attention of the learned Solicitor-General to this matter which is of some importance and in which a very large capital sum is involved, and I hope that on the Report stage what is evidently an omission will be made good.

Mr. M. Lindsay: I think that we can be grateful for the statement made by the Solicitor-General and, in view of what he has said, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

Mr. Roy Jenkins: I beg to move, in page 61, line 12, at the end, to add:
Provided that the issue by a body corporate of shares to members of that body whose right to participate in the assets is not thereby increased shall not be deemed to be the giving of valuable consideration within the meaning of this subsection.
I feel rather sorry that the Chair has decided to call this Amendment, because it is becoming clear that the only way to get an Amendment from this side of the Committee accepted by the Government is not to have it selected by the Chair. As this is largely in the nature of an exploratory Amendment, I need not be too distressed about that. The hon. Members and myself put this Amendment down in the hope that the Solicitor-General would explain it to us.
Clause 57 (3), to which it relates, says that where a company issues shares for a consideration other than cash, for a factory or something of that sort, their share profits can be increased by 10 or 12 per cent. of the amount. That is what I would have read into this Clause, there being a corresponding arrangement where a company does not issue shares.
The "Accountant" has written a number of articles on the subject of the Excess Profits Levy and has put a different construction on this Clause. It has implied that it covers the issue of bonus shares. I would like to call the attention of the Committee to the issue of the "Accountant" which made this statement. In an article on 19th April, 1952, it stated:
In our necessarily brief summary of the levy provisions two weeks ago we said that for the purpose of computing standard profit the expression 'paid up share capital' did not extend to bonus shares, This was incorrect. What we had in mind were Clauses 33 (2) and 34 (2) which provides in effect for an increase in standard profit of a sum equal to 10 per cent.—12 per cent, for director-controlled companies—of any increase in paid up share

capital. The increase is expressly confined to sums which the company receives in cash. The meaning of this is extended by Clause 57 (3)‖.
It gives Clause 57 (3), and goes on to state:
This sub-clause deals with a case of a company acquiring assets in consideration of an issue of its shares, or repaying some of its paid up capital by means of a distribution of its own assets in kind, and is not in our opinion apt to describe the application of undistributed profit in the paying up of bonus shares.
I take it that this means that this does bring in the issue of bonus shares, although it does it in rather a clumsy way. All that the Amendment is designed to do is to ask the Solicitor-General whether the "Accountant" is right in thinking that subsection (3) of Clause 57 does affect the issue of bonus shares in any way.

The Solicitor-General: I will give an answer to the question put by the hon. Gentleman as shortly and as clearly as I can. I can only hope that the hon. Gentleman is not confused in consequence. I say quite emphatically that it is not intended to give any allowances in respect of the issue of bonus shares, and, as far as I can see it, no such allowance could be claimed under the present wording of the subsection.
If a company issued bonus shares, it neither receives cash nor does it receive any valuable consideration, and to entitle it to get an allowance, then the allowance which a company may have for the issue of new share capital is tied to what the company receives in respect of that capital. If it does not receive anything in respect of that issue, it will not be entitled to the allowance.

Mr. Albu: Surely the wording
Where valuable consideration is given otherwise than in the form of money by or to a body corporate‖.
must include the issue of bonus shares.

The Solicitor-General: The company has also to receive something in exchange. It will not get an allowance unless the allowance it gets is tied to what the company receives in respect of that issue. If the company is not receiving anything in respect of the bonus issue it will not get the allowance.

Mr. Jenkins: I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.
Motion made, and Question proposed, "That the Clause stand part of the Bill."

Mr. Roy Jenkins: Before we leave this matter I would like to ask the Solicitor-General a question. There is a paragraph in subsection (1) which starts with the word "Director." It states:
'Director' has, in relation to any body corporate, the same meaning as it has in section two hundred of the Companies Act, 1948, in relation to a company….
I and some of my hon. Friends were unable to discover any definition of the word "director" in Section 200 of the Companies Act, 1948. I should like the Solicitor-General to tell us exactly what is meant by that paragraph.

The Solicitor-General: Section 200 (9) of the Companies Act, 1948, includes not only directors so called, and I quote from the Act, but any
…person in accordance with whose direction or instructions the directors of a company are accustomed to act….
These words are necessary or there may be evasion by people acting as directors although not known as such. They are also necessary in considering whether or not a company is director-controlled. The Amendment which the hon. Gentleman had on the Order Paper and which has not been selected, if it had been carried, would have excluded from the definition of director someone who was, in fact, acting as a director but was not so defined.

8.0 p.m.

Mr. R. Williams: Does not the Solicitor-General feel that this needs a little tidying up? Disregarding entirely the Amendment which was not selected, the question of what is a director arises on the Clause itself, which says that it has, in relation to any body corporate, the same meaning as it has in Section 200 of the Companies Act. That gives the impression that Section 200 of the Companies Act should be consulted for the meaning of the term "director," whereas under Section 200 (9) of the Companies Act it is clearly stated:
…a person in accordance with whose directions or instructions the directors of a company are accustomed to act shall be deemed to be a director and officer of the company.

We are still left entirely in the dark as to what a director is, although we know that there are certain persons who are included in the term "director." To find out what a director is we have to consult Section 455 of the Companies Act, which is not referred to in the Bill. There we find that "director" includes:
…any person occupying the position of director by whatever name called….
The position is rather complicated by the fact that a wider term, "officer." is defined in the same Section of the Companies Act, 1948, where it reads:
…in relation to a body corporate, includes a director, manager or secretary….
In those circumstances I suggest to the Solicitor-General that he might between now and the Report stage look again at Clause 57 on this point, because it seems to my hon. Friends and myself that there is some confusion. At the moment one has to consult a number of authorities, and that is something which the Solicitor-General would not regard as being in any way desirable.
Question put, and agreed to.
Clause ordered to stand part of the Bill.

Mr. Butler: I beg to move,
That the consideration of Parts IV and VI, of new Clauses, of Schedules 1 to 3 and of Schedules 5 to 7 be postponed until after the consideration of Schedule 11.
The Motion means that we go next to the Eighth Schedule, which has to do with the Excess Profits Levy, and take Schedules Eight to Eleven which, I think, will be convenient while we have all this fresh in our minds. We shall then come to the Clause dealing with the Profits Tax, and, after that, the few remaining Clauses of the Bill and then the new Clauses.
The Committee has still a great deal of work to do, although we have two Parliamentary days left. I am most anxious to prevent people from sitting up late or all night, but that entirely depends on progress. I can only say that there is no need to invent work as we already have plenty of work to do. If we go on in the same spirit as we have had I do not see why we cannot make progress in reasonable time; but it depends on getting down to the work and sticking to it in the way we have done.
Question put, and agreed to.
Consideration of Parts IV and VI, of new Clauses, of Schedules 1 to 3 and of Schedules 5 to 7 postponed until after the consideration of Schedule 11.

Eighth Schedule.—(EXCESS PROFITS LEVY: MODIFICATION OF PROFITS TAX RULES AS TO COMPUTATION OF PROFITS.)

Amendment made: In page 94, line 29, leave out from "shall," to end of line 30.—[Mr. Maudling.]

Mr. Maudling: I beg to move, in page 94. line 37, at the end, to insert:
(b) no initial allowance had fallen to be made under Part I, Part II or Part III of the Income Tax Act, 1945. in respect of expenditure incurred before the sixth day of April, nineteen hundred and forty-six; and.
I ought perhaps to start by saying that the purpose of the Eighth Schedule is to provide that, in comparing the profits of a company between the standard period and the chargeable period, as far as possible no extraneous factors should be allowed to enter. This is a comparative tax based not on the actual level of profits but on the difference between the levels of profit in the given period and the subsequent period. Therefore, it is most important that they should be as near as possible to the actual operating profits of the company at the time, and certain additions or subtractions which have arisen for arbitrary reasons should for the purpose of E.P.L. be excluded.
From the taxpayer's point of view it is obvious that while for the chargeable period he wishes his profits to be as low as possible and therefore, the deductions to be as high as possible, for the standard period it is in his interest that his profits should be as high as possible, and any additional deductions from the standard period work against the taxpayer. The Amendment deals with a small point which, if it were not for the Amendment. might give rise to injustice.
Under the Income Tax Act, 1945, certain capital expenditure incurred between 1944 and 1946 was treated as having been incurred at a subsequent date and an initial allowance in respect of that expenditure was granted for the Income-Tax year 1947–48. As a result of that three-quarters of the initial allowance would fall in the year 1947, which is one of the standard years for E.P.L. purposes. Therefore, the taxpayers' standard in that

year would, without the Amendment, be reduced by reason of a wholly arbitrary provision in the 1945 Act which brings into 1947 deductions which are really deductions in respect of previous years. I ask the Committee to accept the Amendment as it is designed to remove what might otherwise be a source of unfairness to the taxpayer.
Amendment agreed to.
Further Amendment made: In page 94, line 47, after "occur," insert:
with the omission of subsection (4) of section two hundred and sixty-five and with the substitution, in the proviso to subsection (6) of that section, in the proviso to subsection (2) of section two hundred and seventy-nine, and in the proviso to subsection (1) of section three hundred and nine of 'nineteen hundred and forty-six' for 'nineteen hundred and forty-four.'"—[Mr. Maudling]

Mr. Maudling: I beg to move, in page 94, line 47, at the end, to insert:
(c) any election made after the fifth day of April, nineteen hundred and forty-seven, under section seven of the Income Tax Act, 1945 (which, in the case of such an election, authorises the making of initial and annual allowances instead of allowances for depreciation of mills, factories and other premises), had not been made; and.
This Amendment is also designed to ensure that the two assessments for the standard period and the chargeable period shall be, as far as possible, on a comparable basis. The Income Tax Act. 1945, introduced initial and annual allowances for industrial buildings. The taxpayer, in the case of buildings which already enjoyed the old depreciation allowance for mills, factories and similar buildings, was given the option to elect between continuing with the old allowance or changing to the new basis of the initial allowance.
In the case of the reconstruction or extension of a factory, it would be in the taxpayer's interest to change from the allowance for mills, factories and similar buildings to the new initial allowance basis. If he were allowed to do that in the standard period or subsequently in the chargeable period, it would introduce an element of disparity between the assessment of his profits in the standard period and the chargeable period.
The purpose of the Amendment is to say that any election of that kind shall, for E.P.L. purposes, be treated as if it had not been made and that buildings which started on one basis shall be treated


throughout the E.P.L. periods on the same basis. This is done so that there shall be parity of profits between the two periods.
Amendment agreed to.
Further Amendment made: In page 94, line 50, leave out from "If," to second "the," in line 52.—[Mr. Maudling.]

Mr. Maudling: I beg to move, in page
95, line 5, at the end, to insert:
(3) An election under sub-paragraph (2) of this paragraph shall be made either—

(a) within twelve months from the end of the first chargeable accounting period of the body corporate or such longer period as the Commissioners may in their discretion allow; or
(b) within twelve months from the end of the period of charge to the excess profits levy or such longer period as the Commissioners may in their discretion allow;
and any election made under paragraph (a) of this sub-paragraph may be withdrawn by notice in writing to the Commissioners within the period mentioned in paragraph (b) of this sub-paragraph; and all such assessments, additional assessments, reductions of assessments and repayments of tax shall be made as are necessary to give effect to an election made under paragraph (b) of this sub-paragraph or to the withdrawal of an election made under paragraph (a) thereof.
Under the Bill as drafted, the taxpayer, for initial allowances purposes, is given the right to elect between two alternatives either of which shall apply to both the standard and the chargeable periods. He can choose that his initial allowances throughout shall be treated on the basis on which they were treated before the Finance Act, 1949, which doubled them and the Finance Act, 1951, which abolished them, or he may elect that throughout both periods no account should be taken of initial allowances.
Under the Bill the election had to be made within 12 months of the commencement of the first chargeable accounting period. It has been represented to my right hon. Friend—there are some Amendments on the Order Paper on the point—that this is too short a period, that it should be extended and that a right of revocation should be given.
Under the Amendment the right of election may be exercised within 12 months from the end—not the beginning—of the first chargeable accounting

period or, alternatively, within 12 months of the end of the period of charge to E.P.L., and the taxpayer shall have the right of revocation of his election within the second of these two periods; that is, within 12 months from the end of the period of charge to E.P.L.
The purpose of the Amendment is to give the taxpayer more latitude. It has been pointed out that he would in some cases have to make this election, which might have very serious consequences to him, wholly as a shot in the dark, and my right hon. Friend feels that the Amendment should be introduced so to give the taxpayer the fairest possible treatment.
Amendment agreed to.
Further Amendment made: In page 95, line 10, leave out from "allowances" to end of line 12.—[Mr. Maudling.]

Mr. Maudling: I beg to move, in page 95, line 36, to leave out "commencement," and to insert "end."
The purpose of the Amendment is very similar to that of an Amendment I have just been explaining to the Committee. Once again it is a question of an election being made, in this case not in respect of an initial allowance but in respect of an annual allowance. In the original draft the period during which the election could be exercised was 12 months from the beginning of the accounting period. The Amendment changes that to 12 months from the end of the accounting period.
Amendment agreed to.
Further Amendment made: In page 95, line 37, leave out "trade or business," and insert "body corporate."—[Mr. Maudling.]

Mr. Maudling: I. beg to move, in page 95, line 50, at the end, to insert:
5. The profits or losses shall be computed without regard to any balancing allowances and charges or to any charges on the sale of patents under sections three, seventeen, twenty-eight and thirty-seven of the Income Tax Act, 1945, or sections two hundred and sixty-seven. two hundred and ninety-two, three hundred and eight and three hundred and eighteen of the Income Tax Act, 1952.
The purpose of the Amendment is to deal with two related points, balancing charges and the spread of capital receipts in respect of the sale of patents. The object of the Schedule is to ensure as far


as possible that the two periods, the standard period and the chargeable period, shall be assessed in the same conditions. Balancing charges and balancing allowances may be quite arbitrary in their incidence. Take, for example, the really outstanding case of the loss of a ship. The ship may be lost suddenly, as a result of which the company may be subject to a very substantial balancing charge which will increase the company's assessable profits for the period in which it occurred.
It seems clear that these arbitrary charges or allowances should not be allowed to enter into the computation for E.P.L. purposes, because they are liable to cause serious injustice. The Amendment is designed to ensure that no account shall be paid to balancing allowances or balancing charges in making E.P.L. computations. The same consideration applies to receipts from the sale of patents. These receipts may be spread for tax purposes over a period of six years. It is quite clear that a sale in 1950, for instance, will enter into the chargeable period for E.P.L., and it will put an additional charge on the taxpayer which does not really relate to the charge on the body corporate in the chargeable period.
The Amendment has the two-fold purpose of dealing with balancing charges and allowances and the spread of capital receipts. It is designed to ensure the strictest possible parity in the standard with the chargeable periods.

8.15 p.m.

Sir F. Soskice: The Schedule is designed, of course, to modify the rules for the purpose of computing profits. The Amendment is to leave out, in that computation, the balancing charge which may be made in certain circumstances upon the disposal of an asset. The Schedule does not in any place exclude the ordinary annual allowance and, unless I am mistaken, the trader is entitled to write off annually a certain amount in respect of his plant or machinery, and to compute his profits afterwards.
I am not cavilling at the Amendment.. There is probably a perfectly good reason, and I am asking what the reason is, why, when the trader has written his plant or machinery down to a figure which results in a situation in which normally a balancing charge would be imposed, he should be given tax free what is really a part of his annual income.

The plant or machinery can be disposed of for a payment, after being written down, which would ordinarily give rise to a balancing charge. In effect, he has reckoned as part of his income, what he has lost by the writing down process.
The Minister has given one reason for attempting to produce parity as between the chargeable and the standard period. There is probably also a good reason why what the trader enters into his profit and loss account as part of his profits should not be subject to the Excess Profits Levy. I am asking whether it is right that the trader should receive, as he apparently will as a result of the Amendment, part of his income tax free from the Excess Profits Levy.
Speaking for myself, I entirely agree with the motive of trying to produce an analogous situation in the standard and the chargeable period, but it seems to me offhand, unless I have misunderstood the situation, that the result of attempting to do so by introducing the Amendment will be that the trader will receive a sum of money which otherwise would have to go into the balancing charge as part of his income, and which is to be freed from the Excess Profits Levy.

Mr. Maudling: As I understand the right hon. and learned Gentleman's argument, I think the answer would be that whichever course was adopted will benefit some traders and damage others. When a balancing charge occurs—it may be purely an accident, such as the loss of a ship—the effect is to increase the assessable profits for profit-making purposes. If the balancing charge is ignored, then quite clearly that is to the benefit of the trader. If the benefit were ignored in the standard period, then it would be to the detriment of the trader, because it is to the trader's advantage that the deductions from his assessable income in the standard period should be as small as possible.
I hope the right hon. and learned Gentleman will agree that whichever course is adopted, it is bound to affect some people one way and other people another way, because the interests of the trader are entirely opposite as between standard period and chargeable allowance. Therefore, my right hon. Friend considers that the satisfactory way of dealing with the matter is to eliminate


any balancing charge or allowance altogether, because they refer to an incidence that has happened outside the particular year in which they arise. The balancing charge is levied because the trader is enjoying too much in the way of depreciations; and, on the other hand, the balancing allowance arises because the trader in practice has not had enough depreciation allowance. The whole thing may work both ways. My right hon. Friend thought it best to exclude both altogether.
This Amendment does not affect the ordinary wear and tear computation, and provision is made for that in line 6, of page 95, where it says:
Nothing in this paragraph shall be construed as requiring any adjustment of the deductions falling to be made under paragraph 1 of Part I of the said Eighth Schedule otherwise than in respect of initial allowances.
That means that no alteration shall be made in the wear and tear computations for the purpose of E.P.L.

Sir F. Soskice: I am much obliged to the hon. Gentleman, but I am not sure that his answer satisfies me. I see what he has in mind, but I can conceive of a case of a trader who, throughout the period which begins with the period of charge receives annual allowances against his capital equipment and receives a substantial sum in one of the periods because he disposes of the plant. The amount he receives greatly exceeds the written down value of the balance, and he receives that amount in that year. I should have thought that that probably was not going to raise the equalisation between standard and chargeable periods. I do not want to take the matter much further, and I see the point which the hon. Gentleman has in mind. I should not say that necessarily it is the right result, and possibly the hon. Gentleman will consider what I have said between now and the Report stage.

Mr. Maudling: z: Certainly I will consider it. I might add that the balance which the right hon. and learned Gentleman gives, when applying to the balance in charge, would be exactly the opposite way round if it applied to the balancing allowance.
Amendment agreed to.

Mr. G. P. Stevens: I beg to move, in page 96, line 36, after "allowable," to insert:
or a receipt, including sums falling to be treated as trading receipts under paragraph 2 of Part I of the Eighth Schedule to the Finance Act, 1947, would be included.
This group of five Amendments to lines 36, 37, 39, 40 and 41 deal with the one subject of receipts. Paragraph 8 of this Schedule requires that where exceptional expenses are incurred and are proper deductions from the profits of a company, those expenses are attributable to a larger period than the one accounting period and they shall be apportioned over the accounting periods to which they properly relate. These five Amendments have the effect of making that apply to exceptional receipts as is required in respect of exceptional expenses.
I can think of one example which came to my notice only a few months ago. It happened to be a client company of mine, and they made Horsa gliders in large quantities during the war on the basis that the price which the Government would pay for them would be settled after the war. The gliders were probably made by the company between the years 1943 and 1945. I do not remember the exact years. The final settlement of the contract by the Government was in 1948, when the company received a very substantial payment.
That is a case which could easily be repeated under the present circumstances of re-armament, and if it is right and proper that exceptional expenses should be apportioned over a period these exceptional receipts should be dealt with in exactly the same way. For that reason, I hope that the Parliamentary Secretary to the Ministry of Civil Aviation will be able to accept this Amendment, or alternatively introduce an Amendment which will have the same effect.

Mr. Maudling: A large part of my hon. Friend's Amendment is already covered by the Amendment which I have just moved dealing with balancing charges and allowances. These are sums falling to be treated as trading receipts to which reference is made in the first of this group of Amendments, and beyond that I am afraid my right hon. Friend does not feel that in practice he can go. Provision is made for the disallowance of exceptional expenditure for the purposes of E.P.L.,


but not for exceptional receipts in any given year. This, in fact, follows the example of the old Excess Profits Tax Code, which was found to be necessary in order to ensure proper comparability 'between the standard period and the chargeable period.
If I can give examples of the sort of payment to which this paragraph is to be put, I can cite exceptional payments like compensation for loss of office, lump sums payable in commutation of pension and so on, and if there were not provisions to deal with exceptional payments of this kind concentrated in a given year, obviously there would be considerable opportunity for avoiding a part of the E.P.L. charge. The old Excess Profits Tax did not cover receipts for the same reasons as this provision does not cover exceptional receipts.
It would be quite impossible to determine what part of any company's trading receipts are exceptional. It could be argued that a company had a particularly profitable year or received a heavy dividend through a particular investment in the Excess Profits Levy period. The Revenue Authorities have, in fact, no information available which would enable them to test the position of the receipts, and no true comparison would be possible to achieve the result in the matter of exceptional receipts as it is not in practice possible to achieve in the matter of exceptional payments.
As I have said already, the main point behind this group of Amendments has been met by my right hon. Friend's Amendments about balancing charges and balancing allowances, and in practice it is quite impossible for us to go any further, but I would remind my hon. Friend that this is a comparative tax. It compares one period with another, but it does not fall on the total profits or excess profits in one period. If the same conditions are applicable to both periods, there cannot be any serious injustice to the taxpayer, and I hope in the light of that my hon. Friend will be prepared to withdraw his Amendment.

Mr. Horobin: I do not think that the answer we have just had is altogether satisfactory. Taking the first point, it is not true that the matters dealt with in the Chancellor of the Exchequer's previous Amendment deal with all those proposed

to be dealt with under this. This Amendment includes sums which fall to be treated similarly. Those sums included are dealt with under the Amendment of the Chancellor which we have just accepted. As to the hulk, they obviously will not be dealt with unless something of this kind is allowed. It is difficult for fair-minded people in all parts of the Committee to accept the view put forward that in some extraordinary way it is possible to test an exceptional expenditure but it is not possible to test an exceptional receipt.

8.30 p.m.

Mr. Maudling: That is a fact, because the information with regard to expenditure in the standard period is available to revenue authorities but there is no similar information available in respect of receipts.

Mr. Horobin: But the onus of proof is upon the company, and if the company can show, as it would have to show, that the receipts obtained in one of those years were exceptional, the same principle should apply as in the case of a deduction. I do not want to hold up the Committee, but I hope that the Parliamentary Secretary will look into this between now and the Report stage—

Mr. Maudling: indicated assent.

Mr. Horobin: —to see if he cannot meet something which seems to be reasonable, namely, that if the company is to be damnified because of its exceptional payments, it should have exceptional receipts taken into account.

Mr. Crosland: I am a little puzzled by what has been said from the benches opposite. I am puzzled by the example given by the hon. Gentleman of the Horsa case. I should have thought that if he were anxious to do his best for the company with whose affairs he was concerned, he would want the receipts for those Horsas to be accounted as accruing in the standard period and not in the period during the war to which they were attributable.

Mr. Stevens: I agree with the hon. Gentleman so far as that example and those years were concerned. I was giving it simply as an example of what could happen in 1952 as easily as it happened in 1948.

Mr. Crosland: I agree with what the hon. Member for Oldham, East (Mr. Horobin) has just said. It is a little unconvincing to say that an expense can be traced and identified so easily yet nothing can be done about receipts. I thought the hon. Member had a very fair point when he said that the onus of proof would be on the company, since it is the company which will try to get, not unfair, but legitimate advantage, by showing this, and it would not try to do so unless it had evidence which would be satisfactory to the Commissioners.
I should have thought the Horsa case was a common type of case. For the company concerned it would be the easiest thing in the world to show that it was an exceptional receipt, not attributable to anything which happened during the standard or present chargeable accounting period. I should think this was worth looking at in detail to see if such exceptional cases could not come under some formula which would satisfy the point raised.

Mr. Stevens: I thought the Parliamentary Secretary sounded a little vulnerable when he replied, and that was evidenced by the nod he gave to my hon. Friend the Member for Oldham, East, when he suggested that it should be looked at between now and the Report stage. Accepting that nod for the word, I beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.

Mr. Maudling: I beg to move, in page 98, line 7, to leave out from "commenced," to "and," in line 8, and to insert:
before the first day of January, nineteen hundred and forty-seven.
This, together with the next bunch of six Amendments standing in the name of my right hon. Friend the Chancellor of the Exchequer, is consequential upon the change in the standard period in the three years 1947, 1948 and 1949 to a choice of two of those three years.
Amendment agreed to.
Further Amendments made: In page 98, line 16, leave out "period," and insert "years."
In line 19, leave out "period," and insert "years."

In line 24, leave out from "than," to "bears," in line 25, and insert "two years."
In line 30, leave out "or years."
In line 31, leave out from "election," to "and," in line 32, and insert "were not a standard year."
In line 34, after "(b)," insert" or paragraph (c)."—[Mr. Maudling.]

Mr. Maudling: I beg to move, in page 98, line 35, at the end, to insert:
11. Any deduction which, but for this paragraph, would fall to be made in respect of expenses incurred by the body corporate in the restoration of assets situated in territory which, at any time during the years nineteen hundred and forty-two to nineteen hundred and forty-five, was under Japanese occupation shall be made only to the extent (if any) that the expenses have not been and are not to be met directly or indirectly by the Crown or by any government or public or local authority, whether in the United Kingdom or elsewhere.
This Amendment is designed to give further assistance to rubber growers and others in the Far East who have suffered as a result of Japanese occupation. The object of the Amendment is to eliminate the cost of rehabilitation expenditure incurred by rubber growers and others which has been met, or may be met, by way of compensation. If the cost of this rehabilitation expenditure were not excluded, it would be a further deduction from the profits of the rubber growers and other traders in the Far East in their standard years and, therefore, would increase their liability to E.P.L.
A good deal of such expenditure will have been incurred in the standard years, and so far as the companies are to be compensated it would, clearly, be unfair that their standard profits should be reduced by the expenditure, and it also would be unfair to charge the compensation payments to the Excess Profits Levy if they are received during the chargeable period.
The effect of the Amendment, therefore, is that both compensation and the corresponding expenditure are to be left our of account in computing the profits of the standard years and the chargeable periods. This is designed to give further assistance to these companies which operate in the Far East and which have suffered so severely from the Japanese occupation. My right hon. Friend hopes that in addition to the substantial concessions that he


has already made, this will be of some assistance to these companies in their very important work.

Amendment agreed to.

Motion made, and Question proposed, "That the Schedule, as amended, be the Eighth Schedule to the Bill.

Mr. Douglas Marshall: I wish to put just one point to my hon. Friend. There is no doubt that the shipping industry will welcome a number of the Amendments which the Chancellor has put down to the Schedule. There is, however, one point which needs to be clarified and which, I hope, my hon. Friend will be kind enough to say that he will consider before the Report stage.
In levying a tax which is based on the comparison of profits of one period with those of another, my hon. Friend will, I am sure, agree that it is necessary to compare like with like. For example, in the case of need—that is to say, the nation's need—it is necessary to keep in service ships which one would describe as "over age," for longer than usual, simply because of the physical limitation of our shipyards and also because of our war losses.
The Chancellor will realise that the initial wear and tear allowances are calculated on the straight-line method as far as the shipping industry is concerned. A fixed proportion is written off each year until it is fully written off, and then it stops. In other industries this is not the case. Therefore, there will be cases where ships' wear and tear allowances will have been taken into account as a deduction in arriving at the profit of the standard years, but there will be no corresponding deductions at all in 1952 and subsequent years.
Even if the ships are earning no more than in the standard years, there will be E.P.L. merely because of the accident of writing down the ship and unless the shipping industry get an adjustment, the Position will be that every ship of mature age will automatically earn E.P.L., not because she is cheaper to run—no doubt, as the Parliamentary Secretary may know, in all probability she will be more expensive to run—not because the freight earnings are, in fact, greater—they may be less—but simply because the wear and tear allowance has ceased.
The justice of this claim is based on the comparison of like with like and it was conceded for E.P.T. purposes. During the passage of E.P.T. it was conceded in principle and agreed. I should like the Parliamentary Secretary to say that he will look at this and give it further consideration.

Mr. Houghton: While the Parliamentary Secretary is reflecting on the answer to that point, I wish to put another to him which as far simpler.
I wish to draw attention to paragraph 6 of the Schedule, which is headed, "Unreasonable or unnecessary expenses." As the Committee will see it provides that:
No deduction shall be allowed in respect of expenses in excess of the amount which is reasonable and necessary….
and so on. There is nothing new in these words. We have seen them before in provisions for excess profit legislation. But the fact of having seen these words before did not prevent right hon. and hon. Gentlemen opposite from bitterly criticising my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) last year when he was introducing provisions against tax avoidance.
Some of his provisions were criticised either on the grounds that they were vague or that they were too severe. None will criticise this paragraph on the ground that it is too severe, though I suppose it could be criticised on the ground that it is vague. I should like to hear from the hon. Gentleman an assurance that his right hon. Friend does feel that this paragraph is a necessary part of his equipment against the avoidance of Excess Profits Levy.
I think it worth while having that assurance on the record in case of future need, because the mere re-introduction in the Finance Bill last year of safeguards against tax avoidance did not reduce in any way the strength and vehemence of the attack on my right hon. Friend by right hon. and hon. Gentlemen opposite. I think that either a little repentance or a removal of the hangover of synthetic indignation and humbug of last year will not be amiss.

Mr. Mitchison: May I ask the hon. Gentleman one question? An expenditure has to be reasonable and nesessary. Would he explain what that means? If expenditure is necessary can it also be


unreasonable? Are the words, "reasonable and" an addition to or a limitation of the necessity?

8.45 p.m.

Mr. Maudling: Several interesting points have been raised. I must say that the one raised by my hon. Friend the Member for Bodmin (Mr. D. Marshall) is a new one. I imagine that it arises from the practice in the shipping industry of using the straight line rather than the reducing balance method of computing wear and tear. I should like to examine this point carefully and to discuss it with my right hon. Friend before the Report stage.
The hon. Member for Sowerby (Mr. Houghton) tempts me to enter into discussion of certain features of last year's Finance Act, which I am sure would be out of order and which I feel we may have subsequent opportunities to discuss. My right hon. Friend considers that it is necessary to avoid certain methods of escaping E.P.L. law to have this provision which is carried on from the old Excess Profits Tax provision.
I think that it would be most unwise of me to enter into a discussion with the hon. and learned Member for Kettering (Mr. Mitchison) on the meaning of the words "reasonable and necessary." These words appear fairly often in the tax statutes—in Schedules D and E and so on. So far as I understand the position, the condition is twofold. The amount should be both reasonable and necessary. Speaking without notice, I imagine that the difference would be that one can spend money on something which is necessary, but nevertheless one can spend an unreasonable amount upon it. There were many examples during the tenure of office of the previous Government where they spent unreasonable sums on what were wholly necessary purposes.

Mr. Mitchison: So far as I can see, it is the amount which must be reasonable and necessary.

Mr. Maudling: If I should be incorrect, I will withdraw, but I think that the amount must be both reasonable and necessary, and my right hon. Friend considers this provision necessary and reasonable.

Schedule, as amended, agreed to.

Ninth Schedule.—(EXCESS PROFITS LEVY: ASCERTAINMENT OF UNDISTRIBUTED PROFITS OR OVER-DISTRIBUTION OF PROFITS FOR AN ACCOUNTING PERIOD.)

The Solicitor-General: I beg to move, in page 99, line 6, at the end, to insert:
(b) half the amount (if any) of any deductions based on, or losses incurred in, any accounting period ending at or before the relevant date (as defined in the provisions of this Act applicable to the body corporate) and carried forward under paragraph (3) of Rule 6 of the Rules applicable to Cases I and II of Schedule D or section thirty-three of the Finance Act, 1926, to the extent that they have not been taken into account in previous accounting periods and do not exceed half the profits (if any) for the accounting period.
This Amendment is proposed to meet a position to which attention has been drawn. It is a small point, but one which must be corrected. The Committee will understand that the profits for the purpose of assessing the standard of undistributed profits and over-distributed profits are taken at 50 per cent. to allow for the fact that they bear Income Tax or the undistributed rate of Profits Tax first, which amount together to about that figure. But where losses or unexhausted capital allowances for wear and tear are carried forward into the period for which undistributed profits are to be computed, they reduce the tax payable on undistributed profits to below 50 per cent., and indeed might eliminate it.
It would be unfair to force the concern where that has happened to bear a deduction of 50 per cent. from its profits on account of tax which it has not been liable to pay. This Amendment corrects that anomaly by adding to the half profits for the relevant period half any losses or capital allowances carried forward from any accounting period, ending at or before the relevant date, into the period for which undistributed profits are computed so far as they have not been taken into account in previous periods and do not exceed half the profits as computed for the accounting period.
I hope that I have made the point plain. It is a small point which is certainly most complicated. The Amendment puts the position right in this respect.

Sir F. Soskice: Can the hon. and learned Gentleman give an example Of expenditure carried forward from a previous year half of which is to be computed for this purpose? What type of circumstance has he in mind? Is such a person


not in the same position as a trader who, in some instances, is entitled to carry forward from the previous year unallowed expenditure in the year in respect of which the authorities were computing his over-payment or under-payment of Profits Tax? Could the hon. and learned Gentleman not give us an example?

The Solicitor-General: The right hon. and learned Gentleman will no doubt recollect that we have made provision for the carrying forward of losses.
Amendment agreed to.

The Solicitor-General: I beg to move, in page 99, line 38, to leave out "paid," and to insert "borne."
This Amendment deals with a very small point concerning Surtax paid by one-man companies. The point which has been raised is that on occasions, for convenience, the company pays the Surtax on behalf of the member, but recoups itself later out of the dividend due to the member. In that particular type of case, the company has not really paid away its profits to the extent of Surtax charges, and it would not be proper to treat its undistributed profits as having been diminished by that amount. The Amendment, by substituting the word "borne" for the word "paid," makes it clear that, in this type of case, the undistributed profits will not have been reduced by reason of the Surtax paid but later recovered from the member.
Amendment agreed to.

The Solicitor-General: I beg to move, in page 99, line 45, to leave out "eighteen," and to insert:
fifteen, or, as the case may be, ten.
This Amendment is consequential on the change of the overriding limit from 18 to 15 per cent. and to 10 per cent. in the case of a company with business overseas.
Amendment agreed to.

The Solicitor-General: I beg to move in page 100, line 6, after "Act," to insert:
and the paragraph of that Schedule which relates to allowances and charges under sections three, seventeen, twenty-eight and thirty-seven of the Income Tax Act, 1945, or sections two hundred and sixty-seven, two hundred and ninety-two, three hundred and eight and three hundred and eighteen of the Income Tax Act, 1952.

This Amendment is consequential on the new paragraph to the Eighth Schedule which has been put down in order that balancing allowances and charges and capital sums received for the sale of patents shall not be taken into account for Excess Profits Levy purposes.
Amendment agreed to.

The Solicitor-General: I beg to move, in page 101, line 14, at the end, to insert:
Provided that "net," in relation to share interest paid, without deduction of income tax, by a registered industrial and provident society within the meaning of section four hundred and forty-six of the Income Tax Act, 1952, means after deduction of an amount equal to income tax on the amount of the payment, at the standard rate in force at the date of payment.
This Amendment covers a point raised by co-operative societies. Under the Income Tax Acts, they are required to pay their share interest in full without deduction of tax, and this Amendment makes compensatory provisions to ensure that they are not penalised so far as the Excess Profits Levy is concerned in consequence of having to pay interest without deduction of tax.

Amendment agreed to

Schedule, as amended, agreed to.

Tenth Schedule.— (EXCESS PROFITS LEVY: EFFECT OF CERTAIN TRANSFERS OF GOING CONCERNS.)

Mr. Boyd-Carpenter: I beg to move, in page 103, line 4, at the end, to insert:
 (d) the transferor's borrowed money in that period had been borrowed money of the transferee and not of the transferor; and
This Amendment, and the two immediately following it, are all drafting points which arose from my right hon. Friend's new Clause on borrowed money.
Amendment agreed to.
Further Amendments made: In page 103, line 21, leave out "and (c)," and insert "(c) and (d)."
In line 23, after "capital," insert "borrowed money."—[Mr. Boyd-Carpenter.]

Mr. Boyd-Carpenter: I beg to move, in page 103, line 29, at the end, to insert:
(3) Where under the preceding provisions of this paragraph the standard profits for a full year of the transferor and the transferee fall to be calculated on the assumption that, immediately after the transfer, the transferee has


paid in cash by way of repayment of its share capital and the transferor has received in cash in respect of an issue of its share capital an amount equal to the value of any assets of the transferor not included in the transfer, it shall also be assumed, for the purpose of the calculation, that an amount equal to the liabilities of the transferor not included in the transfer has been so paid by the transferor and received by the transferee.
This Amendment and the one immediately following, to line 40, and also the one to make an addition, in page 106, to line 24, are intended to clarify what happens when a business is transferred on the terms that the purchaser does not assume responsibility for the liabilities of the transferor. As originally drafted, we felt the Bill was a little obscure, and therefore these Amendments were put down to make it clear that, as the fact that only assets are being taken over will be reflected in increasing the purchase price, account of the fact that the purchase has been made on that basis will be taken in giving the purchasing company its standard. In other words, the standard of the purchasing company will be appropriately increased.
Amendment agreed to.
Further Amendments made: In page 104, line 40, at end, insert:
(3) Where under the preceding provisions of this paragraph the transferee's standard profits, or standard profits for a full year, fall to be calculated on the assumption that the transferee has, immediately after the transfer, paid in cash by way of repayment of its share capital an amount equal to the value of any assets of the transferor not included in the transfer, it shall also be assumed, for the purpose of the calculation, that the transferee has, immediately after the transfer, received in cash in respect of an issue of its share capital an amount equal to the value of any liabilities of the transferor not included in the transfer.
In line 48, at end, insert:
and that the transferor had no borrowed money in any period beginning on the date of the transfer.
In page 106, line 24, at end, insert:
(3) Where under the preceding provisions of this paragraph the transferor's standard profits, or standard profits for a full year, fall to be calculated on the assumption that the transferor has, immediately after the transfer, received in cash in respect of an issue of its share capital an amount equal to the value of any of its assets not included in the transfer, it shall also be assumed, for the purpose of the calculation, that the transferor has, immediately after the transfer, paid in cash by way of repayment of its share capital an amount equal to the value of any of its liabilities not included in the transfer.

In line 31, at end, insert:
that the transferor had no borrowed money in any period beginning on the date of the transfer.—[Mr. Boyd-Carpenter.]

Mr. Boyd-Carpenter: I beg to move, in page 108, line 33, to leave out "subparagraph (2) of paragraph 3 or."
This Amendment and the one immediately following to line 39, bring the Tenth Schedule into line with my right hon. Friend's Amendment to the Eight Schedule, to give a company an option to withdraw a previous election in relation to an initial allowance.

Amendment agreed to.

Further Amendment made: In page 108, line 39, leave out from "under," to "sub-paragraph," in line 40.—[Mr. Boyd-Carpenter.]

Schedule, as amended, agreed to.

Eleventh Schedule.—(EXCESS PROFITS LEVY: INTERCONNECTED BODIES CORPORATE.)

9.0 p.m.

Mr. Erroll: I beg to move, in page 110, line 4, to leave out from "Where," to "as," in line 5, and to insert:
on the tenth day of March. nineteen hundred and fifty-two.
I understand that the Chair would like this Amendment to be taken along with those standing in my name and those of my hon. Friends dealing with the paragraph covered by lines 18 to 24 of the Schedule. Therefore, with your permission, Mr. Bowles, I will speak to the three Amendments together.
The Eleventh Schedule admits of group treatment only for groups which existed on 1st January, 1952. Members may leave a group, but no new member may join or be admitted to a group for the purpose of group treatment except where an entirely new business is commenced. No new groups formed after 1st January, 1952, are to be recognised.
This is not altogether a form of treatment for active business, and it is one which is very difficult to understand. I can only suggest that it arises from an earnest desire on the part of the Inland Revenue to avoid fresh regroupings for the express purpose of reducing liability to Excess Profits Levy, and from that narrow point of view it is quite right that steps should be taken to prevent new


groupings from occurring. But we cannot accept that as an over-riding reason, because it is so essential in these days, when business changes and moves so rapidly, that new groups shall be permitted to be formed wherever there is a clearly seen need for them to do so. Groups must be free to form in the future as well as in the past.
It is recognised that groups may separate and that new and separate companies may form. So, equally, it must be recognised that they should be free to coalesce into larger groups if they so wish. I suggest to the Financial Secretary that the initial apprehension of the Inland Revenue when they drafted this Schedule can easily be taken care of by the powers which will lie to them in Clause 59. That Clause will enable them to take all necessary action to counter any organised evasion.
Furthermore, I think it would be as well to introduce an element of reality into this particular aspect of the matter and to say that companies are not likely to group themselves together or to add members to a particular group solely in order to avoid Excess Profits Levy, particularly when the new member of the club—so to speak—is himself in a decline, because the business losses will be far greater than anything the group would be likely to be able to save in Excess Profits Levy by acquiring the new member. I suggest that we might well have a measure of common sense in this matter and allow new members to be added to an existing group of companies in the same way as a former member may be allowed to peel off after 1st January, 1952 if it should so wish.
The break in continuity for setting off excesses and deficiencies which is provided when a member leaves a group can be repeated when a new member joins a group. This would prove to be a further safeguard to the Revenue. I can suggest further ways whereby the Revenue interest can be safeguarded, but I do not wish to detain the Committee with points of detail. If the Financial Secretary can see his way at least to consider my Amendment at this stage we could, perhaps, discuss the matter further by correspondence, so that he could ensure that there would be no loss to the Revenue and, at the same time, allow the maximum freedom to companies to

coalesce or to split off as is deemed best in their interests

The Solicitor-General: I feel that I ought to say something about this Amendment, and I can put it quite shortly. My hon. Friend the Member for Altrincham and Sale (Mr. Erroll) seems to think that this part of the Schedule is designed to prevent companies from associating together and the formation of groups. In one sense it does prevent the formation of groups for the purpose of the Excess Profits Levy, but if a company is set up after 1st January, 1952, with share capital provided by a member of the group, that company can be included within the group. That is the one special case.
Apart from that, if a new business, run by a company with an existing business, is acquired after 1st January, 1952, it will not be included in the group for the Excess Profits Levy but will continue to enjoy its own standards, its profits will be taxed separately from those of the other members of the group and it will get any benefit to which it may be entitled in respect of the over-riding limitation.
Consequently, that company which is acquired is not in any way prejudiced for Excess Profits Levy purposes. Indeed, it may gain an advantage compared with the rest of the companies with which it is associated, because its profits will not be merged with those of other members for the purpose of seeing whether the group as a whole is entitled to relief in respect of the over-riding limitation.
I regret to tell my hon. Friend that, without engaging in any correspondence, it is not possible for the Government to accept his proposal for this reason—that the process of the acquisition of the shares of a company with an existing business developed into a very common form of avoidance of the old Excess Profits Tax. Buying a standard by the acquisition of shares in a moribund business, making it a subsidiary within the meaning of the rules and using its deficiencies to reduce the levy chargeable on the excess profits of other members of the group was by no means uncommon, and in our view the best way of preventing a repetition of that is to ensure that the business which is acquired after 1st January, 1952, shall be treated separately, entitled to its own standards and its own reliefs and everything else, but not allowed to merge with


the group for the purposes of a common standard for all those companies. That is a reason which I hope will commend itself to my hon. Friend, and I hope he will withdraw his Amendment.

Mr. James H. Hoy: That has saved a postage stamp.

Amendment negatived.

The Solicitor-General: I beg to move, in page 110, line 15, at the beginning, to insert:
then, subject to the following provisions of this paragraph.
Perhaps it will be convenient to discuss at the same time the next Amendment, that in line 17.
These Amendments deal with a technical point relating to groups of companies and I think it largely meets a point raised by Amendments standing in the names of many of my hon. Friends, although the wording is a little different. The object of the Amendment is to ensure that group treatment can still be applied to a number of trading companies if we find the position, for instance, where company A has 76 per cent. or 75 per cent. of the shares in company B and B has control over companies C, D and E; and all those companies can be treated as one, although the shareholding of A in the subsidiaries of B will naturally be less than 75 per cent. The Amendments will meet one or two cases where difficulties might have arisen and I think they are effective for that purpose.

Sir Patrick Spens: Let me say a word of thanks to my hon. and learned Friend for having put in this Amendment. It is one of three alternatives which I and my hon. Friends put forward to deal with what is a good deal more than a technical point so far as business groups are concerned, because the provision in the Schedule that every single company in a group had to have 75 per cent. of a company below it did, in fact, cut out a great number of operative groups, because, of course, a company can well be a subsidiary of another if it has more than 51 per cent. and less than 75 per cent. That was really a practical difficulty which met a number of important groups, and in these circumstances, with great difficulty, we suggested three alternatives.
The alternative which the Government have chosen by this Amendment is exactly the same, except for wording, as my proposed Amendment, and that of my hon. Friends, in page 112, line 12. Except for purely verbal differences, it is exactly the same. It does meet the difficulty, and we are very grateful for the consideration that has been given to this point by the Government, and to the Amendment moved by my hon. and learned Friend.

Amendment agreed to.

Further Amendments made: In page 110, line 17, at end, insert:
(2) Where at the beginning of the period of charge to the excess profits levy the conditions specified in paragraphs (a) to (d) of sub-paragraph (1) of this paragraph would have been fulfilled as respects any two or more bodies corporate but for the fact that one of those bodies corporate of which the others were subsidiaries (in this sub-paragraph referred to as "the intermediate owner") was itself a subsidiary of another body corporate resident in the United Kingdom (in this subparagraph referred to as "the ultimate owner") then, if the subsidiaries of the intermediate owner were not also subsidiaries of the ultimate owner, and the ultimate owner and the intermediate owner jointly so elect before the first day of January, nineteen hundred and fifty-four—

(a) the intermediate owner and its subsidiaries shall be deemed for the purposes of this Schedule to form a group; and
(b) the intermediate owner shall not, for the purposes of this Schedule, be deemed to form a group with the ultimate owner or with the ultimate and any other bodies corporate.

In line 18, leave out "Provided that," and insert "(3)."—[The Solicitor-General.]

The Solicitor-General: I beg to move, in page 112, to leave out lines 27 to 34, and to insert:

(a) where the trade or business of any of the members of a group commenced before the first day of January nineteen hundred and forty-seven; or
(b) if the principal member so elects, where that one of the trades or businesses of the members of a group which commenced the earliest commenced after the first day of January, nineteen hundred and forty-seven, but before the first day of January, nineteen hundred and forty-nine; or
(c) if the principal member so elects, where that one of the trades or businesses of the members of a group which commenced the earliest commenced after the first day of January, nineteen hundred and forty-seven but before the first day of January, nineteen hundred and fifty and the condition specified in the proviso to subsection (5) of section thirty-three of this Act would be fulfilled, as


respects the trades or businesses of all the members of the group, if they were one trade or business of one body corporate.

This and the next five Amendments are consequential Amendments flowing from the change in the standard period and the change in the amount of the minimum standard, and a group of companies is given the same options as a single company is given in the main Clauses relating to the Excess Profits Levy.

Amendment agreed to.

Further Amendments made: In page 112, line 45, leave out "July, nineteen-hundred and forty-eight," and insert:
January, nineteen hundred and forty-nine.

In page 113, line 2, leave out from "commenced," to "and" in line 3, and insert:
on or before the first day of January, nineteen hundred and forty-seven.

In line 4, leave out "paragraph (b) of."

In line 14, leave out "two," and insert "five."

In line 22, leave out "two," and insert "five."—[The Solicitor-General.]

Mr. Erroll: I beg to move, in page 113, line 52, at the end, to insert:
(7) Where a subsidiary as defined in paragraph 5 of this Schedule, whether or not it was a member of a group as defined in paragraph 1 of this Schedule, was at any time before the period of charge a subsidiary of a body corporate which is a principal member of a group and carried on a trade or business during the standard period and its trade or business is transferred to another body corporate which is a member of the group, the adjustments shall be made to the standard profits which are required to be made by paragraphs 1, 2 or 3 of the Tenth Schedule to this Act, but so long as the subsidiary is a subsidiary of the principal member of the group the excess or deficiency of the subsidiary or if there are no profits a deficiency equal to its standard profits shall be aggregated with the excess or deficiency of the principal member.
This Amendment deals with the position of subsidiary companies which may be transferred from ownership by one member of a group to another member of the group. It seeks to remedy a minor but important injustice to the profits standards of such companies that, without this Amendment, will be denied the proper basis of the standards to which they would otherwise be entitled; either they or the principal company to which they are transferred.
9.15 p.m.
There are not many cases which are likely to arise, but where they do arise it is important to see that no undue restriction is placed upon the transfer of subsidiaries from one company to another of a group of companies. These changes are often necessitated through the desire to integrate management, or where a company may need to move its principal place of business from one country to another, and one does not wish, through the incidents of E.P.L., in any way to restrict the natural evolution and growth of businesses. My Amendment seeks to remove one small injustice in this levy.

The Solicitor-General: I must confess that when I read the Amendment I did not understand it in the least. I have read it several times, and I am still a little uncertain as to what it means. I am grateful to my hon. Friend the Member for Altrincham and Sale (Mr. Erroll) for explaining the object which lies behind the Amendment.
I am by no means certain that the case which he has put is not adequately covered under the Schedule as it now stands. He is dealing with the case where a company which is already a subsidiary of a member of a group is that transferred by that member to become a subsidiary of another member of the same group. I am under the impression that would not affect its group treatment, but I will look into the matter. In those circumstances, I ask my hon. Friend to withdraw his Amendment.

Mr. Erroll: I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendments made: In page 114, in line 1, leave out sub-paragraphs (1) to (4), and insert:

(1) Subject to the provisions of sub-paragraphs (4) and (5) of this paragraph, the composite figure for the group referred to in subparagraph (1) of the last preceding paragraph shall be the sum arrived at by—

(a) aggregating the profits and losses for the standard years of the members of the group whose trades or businesses commenced before the end of the second standard year; and
(b) reducing the result so that it bears to the full amount thereof the same proportion as one year bears to two years less so much, if any, of the first of the standard years as preceded the commencement of that one of the trades or businesses of the members of the group which commenced the earliest.



(2) The share of each member of the group in the composite figure for the group—

(a) shall, if its trade or business commenced before the end of the second standard year and it had profits for the standard years, be the sum which bears to the composite figure for the group the same proportion as its profits for the standard years bear to the total of the profits for the standard years of all the members of the group which had profits for the standard years; and
(b) shall, if its trade or business commenced after the end of the second standard year or if it had no profits or a loss for the standard years, be nil.

(3) Where the standard profits for a full year of a member of the group fall to be determined under this paragraph, they shall be determined by applying the provisions of subsections (2) and (3) of section thirty-three of this Act—

(a) as if its share of the composite figure for the group were the amount arrived at under subsection (1) of that section;
(b) as if (in a case where that one of the trades or businesses of the members of the group which commenced earliest commenced after the beginning of the first of the standard years) there were substituted, in the said subsection (2), for the reference to the beginning of the first of the standard years, a reference to the commencement of that trade or business, and for the reference to two years, a reference to two years less so much of the first of the standard years as preceded the commencement of that trade or business;
(c) as if, in the said subsection (3), the reference to the relevant date as defined in subsection (6) of that section were a reference to the relevant date as defined in sub-paragraph (7) of this paragraph.

(4) Where the trade or business of any of the members of the group commenced on or before the first day of January, nineteen hundred and forty-seven, the principal member may elect either—

(a) that the aggregated profits and losses referred to in paragraph (a) of sub-paragraph (1) of this paragraph shall be computed as if the aggregated profits and losses of the members of the group for one of the two standard years (to be specified in the election) had been an amount of profit equal to eight per cent. of the average amount of the aggregate paid-up share capital of the members of the group in that year, share capital of any member of the group other than the principal member which was beneficially owned by any member of the group being left out of account; or
(b) that the composite figure for the group shall be ten per cent. of the amount of the aggregate paid-up share capital of the members of the group at the end of the year nineteen hundred and forty-six or the year nineteen hundred and fifty-one (as may be specified in the election), share capital of any member of the group other than the principal member which was beneficially owned by any member of the group being left out of account; or

(c) that the composite figure for the group shall be an amount equal to eight per cent. of the amount by which at the end of the year nineteen hundred and forty-six or the year nineteen hundred and fifty-one (as may be specified in the election) the value of the aggregate assets of the members of the group, computed in accordance with the provisions of the Schedule to this Act (Excess Profits Levy: computation of value of assets, etc., for purposes of capital standard) but leaving out of account the value of any share capital of a member which is beneficially owned by another member, exceeds the aggregate amount of their liabilities so computed;

and the preceding provisions of this paragraph shall have effect accordingly:

Provided that where an election is made under paragraph (b) or paragraph (c) of this sub-paragraph,—

(i) subsection (2) of section thirty-three of this Act, as applied by sub-paragraph (3) of this paragraph, shall not apply to sums received or paid before the end of the year specified in that election; and
(ii) sub-paragraph (2) of this paragraph shall have effect as if the references to the end of the second standard year were references to the end of the first chargeable accounting period of the principal member and the references to profits for the standard years were references to profits for that chargeable accounting period.

(5) Where the condition specified in the proviso to subsection (5) of section thirty-three of this Act is fulfilled as respect one or more members of the group but no election can be made under paragraph (c) of sub-paragraph (1) of paragraph 8 of this Schedule, and no election is made under the last preceding subparagraph, the principal member may elect that the composite figure for the group, and the share of each member in that figure shall be calculated as if the profits or losses of the first-mentioned member or members for the years nineteen hundred and forty-nine and nineteen hundred and fifty were its or their profits or losses for the standard years; and where an election is made under this subparagraph, then—

(a) subsection (2) of section thirty-three of this Act, as applied by sub-paragraph (3) of this paragraph, shall have effect in relation to the said member or members as if the references therein to the first and the second of the standard years were respectively references to the year nineteen hundred and forty-nine and nineteen hundred and fifty; and
(b) notwithstanding anything in this paragraph, the relevant date referred to in subsection (3) of the said section thirty-three shall, in relation to the said member or members, be whichever of the following dates is the later, that is to say the first day of July, nineteen hundred and forty-nine or the commencement of the trade or business of that member or, as the case may be, the commencement of that one of the trades or businesses of those members which commenced the earliest.

(6) The standard years for all the members of the group shall be the years nineteen hundred and forty-seven and nineteen hundred and forty-eight, the years nineteen hundred and forty-seven and nineteen hundred and forty-nine or the years nineteen hundred and forty-eight and nineteen hundred and forty-nine, as the principal member may elect:

Provided that—

(a) where that one of the trades or businesses of the members of the group which commenced the earliest commenced after the first day of January, nineteen hundred and forty-seven but before the first day of January nineteen hundred and forty-eight the principal member may elect that the standard years for all the members of the group shall be the year beginning with the commencement of the said trade or business and the subsequent year;
(b) where that one of the trades or businesses of the members of the group which commenced the earliest commenced after the first day of January, nineteen hundred and forty-seven, and either no election is made under paragraph (a) of this proviso or the said trade or business commenced on or after the first day of January, nineteen hundred and forty-eight, the standard years for all the members of the group shall be the years nineteen hundred and forty-eight and nineteen hundred and forty-nine;
(c) where an election is made under paragraph (c) of sub-paragraph (1) of paragraph 8 of this Schedule, the standard years for all the members of the group shall be the years nineteen hundred and forty-nine and nineteen hundred and fifty.

(7) The relevant date referred to in subparagraph (3) of this paragraph is—

(a) where an election is made under paragraph (b) or paragraph (c) of sub-paragraph (4) of this paragraph, the first day of January immediately following the year specified in the election;
(b) where an election is made under paragraph (a) of the last preceding sub-paragraph, the date falling six months after the date of the commencement of the trade or business referred to therein;
(c) where no such election as aforesaid is made and that one of the trades or businesses of the members of the group which commenced the earliest commenced on or after the first day of January, nineteen hundred and forty-eight, whichever of following two dates is the later, that is to say, the first day of July, ninteen hundred and forty-eight, or the date of the commencement of that trade or;

and in any other case the date specified in the Table set out in subsection (6) of section thirty-three of this Act opposite the years which, in the case of the members of the group, are the standard years.—[Mr. R. A. Butler.]

In page 115, line 13, leave out "the last preceding sub-paragraph," and insert:
sub-paragraph (4) of this paragraph.

In line 14, leave out "reference," and insert "references."

In line 15, leave out "a reference," and insert "references."

In line 34, leave out sub-paragraph (7), and insert:
(7) In this paragraph "profits for the standard years" and "loss for the standard years" mean, in relation to a member of the group the trade or business of which commenced after the beginning of the first standard year, profits or a loss for so much of the standard year as follows the commencement of its trade or business.—[The Solicitor-General.]

The Solicitor-General: I beg to move, in page 115, line 38, at the end, to insert:
10. Section (Addition to standard profits in respect of borrowed money) of this Act shall apply in relation to a member of a group as if references to borrowed money did not include references to money borrowed from a member of the group:
Provided that if before the end of a chargeable accounting period, the nexus has been severed between two members of a group, this paragraph shall not apply to them in relation to that period.
11. Sections (Addition to standard profits in respect of borrowed money), (Bodies corporate holding shares in other bodies corporate) and (Computation of profits for purposes of the excess profits levy in the case of concerns producing certain metals, etc.) of this Act shall apply in relation to a member of a group as if—

(a) references to profits for the standard years were references to its share in the composite figure referred to in paragraph 8 of this Schedule;
(b) references to an election under paragraph (a), (b) or (c) of subsection (4) of section thirty-three of this Act included respectively a reference to an election under paragraph (a), (b) or (c) of sub-paragraph (4) of paragraph 9 of this Schedule; and
(c) references to an election under section thirty-five of this Act included a reference to an election under sub-paragraph (3) of paragraph 8 of this Schedule.

Sir F. Soskice: I should like a word of explanation about this Amendment. The previous Amendments we had been dealing with, as the Solicitor-General has said, really reproduced, as I understand it, for purposes of group treatment the alternative basis of assessing standard profits which the Chancellor of the Exchequer moved at an ealier stage of our discussion. This is a new subsection which deals with borrowed money in relation to group companies and it does not quite fall within the category of a purely consequential Amendment. I suggest that the


Committee is entitled to some measure of explanation from the Solicitor-General.

The Solicitor-General: I shall be only too glad to give the Committee an explanation. The Amendment makes provision for treating group companies in precisely the same way as single companies in relation to borrowed money. It is consequential in that it follows the same rules as those for a single company, except that inter-group borrowings are ignored and only money borrowed from outside sources qualifies for the allowance.

Sir F. Soskice: I am obliged to the hon. and learned Gentleman. I think it was not strictly correct to let us suppose that the Amendment was purely consequential because it makes a change in that inter-group borrowings are to be disregarded and that for the purposes of the group we are to look at outside borrowings. That is not quite consequential.

The Solicitor-General: I did not wish to mislead the Committee. I meant that the Amendment followed the main principles of the Bill. There are slight drafting alterations in other Amendments here, but they are of a very minor character and are intended to bring group companies in line with the rest of the Bill concerning single companies.

Amendment agreed to.

Further Amendments made: In page 116, line 32, leave out "or."

In line 33, after "(b)," insert "or paragraph (c)."

In line 36, leave out "or," and insert:
paragraph (b) or paragraph (c).

In line 37, leave out "paragraph (b)."

In page 118, line 29, after "shall," insert:
subject to the following provisions of this paragraph."—[ The Solicitor-General.]

The Solicitor-General: I beg to move, in page 118, line 34, at the end, to insert:
(2) Where one or more but not all members of the group are such bodies as is mentioned in subsection (2) of the said section thirty-seven, such relief and adjustments (if any) shall be given or made under that section as is necessary to secure that the aggregate amount payable by all the members by way of the

excess profits levy is reduced to, but not below, the sum of the following amounts—

(a) ten per cent. of the profits of the first-mentioned members for the whole period mentioned in subsection (1) of the said section thirty-seven; and
(b) fifteen per cent. of the profits of the other members for the said period.

The Amendment deals with a point which cannot perhaps be described as consequential. It is concerned with the application of the over-riding limitation. The only feature of it to which I wish to draw attention is that, if one or more members of the group have overseas businesses and the others have not, the rate of 10 per cent. is applied to the profits of the overseas members and the rate of 15 per cent. is applied to the others for the purposes of finding out whether the over-riding limitation applies to the group as a whole.

Amendment agreed to.

Further Amendments made: In line 35, leave out "Provided that," and insert "(3)."

In line 43, leave out "not exceed," and insert "be equal to."—[The Solicitor-General.]

Schedule, as amended, agreed to.

Clause 30.—(INCREASE, IN CERTAIN CASES, OF DEDUCTIONS ALLOWABLE FOR DIRECTORS' REMUNERATION.)

Mr. R. A. Butler: I beg to move, "That the Chairman do report Progress and ask leave to sit again."
The only observation I wish to make is that we have a great deal of work to do, but I think we have got over many of the main issues of the Bill. I hope that when we come to the new Clauses we can make progress. I am obliged for the spirit in which these matters have been debated.

Mr. Gaitskell: I agree with the Chancellor that we have made substantial progress. One reason I have for regretting that we are adjourning now is that we have been discussing the Excess Profits Levy, and there has been a great deal of talk about the Conservative Party manifesto and how that particular part came to be written in. Now we have the right hon. Gentleman the Prime Minister with us it would have been interesting to hear his opinion. But it is a little too late to start another Clause, so we must try to induce him to give us his views on another occasion. On this occasion we have no objection to the Motion.

Question put, and agreed to.

Committee report Progress; to sit again Tomorrow.

CEMETERY, KINGSBURY

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Studholme]

11.35 p.m.

Wing Commander Eric Bullus: The subject I wish to raise may be considered a constituency matter, but it has more than parochial interest because it concerns the entire borough of Wembley and the adjacent borough of Willesden. For this reason I verbally acquainted the two hon. Members for Willesden, East (Mr. Orbach) and Willesden, West (Mr. Viant), in the hope that they might have been present, but no doubt they realise that I shall have nothing to say adverse to their honourable borough and they have left it to me. The subject also has a wider interest, in that the principle concerns local government authorities generally.
Briefly, the question is whether the borough of Willesden should have a cemetery in the borough of Wembley. In


this respect the local councils of these two boroughs have been at variance in the past few years, but the matter has now reached a stage where Willesden are about to begin the construction of their cemetery. Though I have no desire to take a great deal of time in following the various steps taken by the two local authorities since Willesden purchased the land in Kingsbury, Wembley, in 1929, it is necessary to indicate how we have arrived at the present position.
In 1929, as an urban district council, Willesden purchased 49.8 acres of land at Kingsbury for cemetery purposes, in spite of the objection of the then Kingsbury Urban District Council. Following a local inquiry the then Minister of Health gave sanction, on certain conditions, for a site of 27 acres to be zoned for cemetery purposes. This was done under the Wembley (Kingsbury) planning scheme. It is important to note that at this time the only house near the site was the reservoir cottage.
In making the Order the Minister indicated that, as the cemetery site was not to be used for some years, he considered that in due course it would be necessary for the Willesden Council to give fresh notice under the Public Health Acts. There is no evidence that these notices have ever been given.
In 1932 Willesden sold 14 acres of the site to Kingsbury, and this today forms part of the Welsh Harp open space. A year later sanction was given for the fencing of the site, and this was erected in 1934, the year that the Kingsbury local authority was absorbed by Wembley. No further action was taken by Willesden to develop the site before the war and, although during the war sanction was given for works to enable the ground to be used for the burial of any civilian war dead, the site was never, in fact, so used.
In 1947, Wembley, now a borough council, considered the possibility of this land's being re-zoned for open space purposes. The planning consultant of the former Central Middlesex Planning Committee, reported as follows:
The value of the Welsh Harp and its environs as a possible regional open space has already been emphasised to the committee. It therefore amounts to balancing the regional value of the land as open space against the urgent need of the Willesden Borough as regards disposal of the dead.

Later the same day the Joint Committee commented:
The Joint Committee supports the views of the planning consultant that this land should be shown upon the draft development plans as being land reserved for open space purposes and should not be used for cemetery purposes.
At this time Wembley offered to share with the borough of Willesden the facilities that Wembley themselves were obtaining in an adjacent county, because Wembley had gone out into the county of Hertfordshire. Without prejudice, members of Willesden Council went out to Carpenders Park in Hertfordshire and looked at the site obtained for Wembley. They then reported, among other things, that the distance was too far. But the distance is about nine miles from the borough of Willesden to the Carpenders Park site in Hertfordshire which Wembley are to use for their own cemetery purposes.
When it was apparent that Willesden intended to go ahead with the cemetery in Wembley, Wembley protested to the Ministry of Health and pointed out that as the original provisions of the Wembley (Kingsbury) planning scheme had lapsed because of the operation of the Town and Country Planning Act, 1947, new planning consent would be required. Willesden therefore made representations again and, despite the protests of Wembley, the Ministry gave planning authority in August, 1950, for a reduced cemetery site of 13 acres.
Since the original purchase by Willesden in 1929, over 200 houses have been built in the vicinity of Birchen Grove, in Wells Drive, Leith Close and Dors Close and other streets, and the new cemetery site would immediately adjoin these houses. The residents of Birchen Grove and district therefore formed a protection committee. As a result of a petition and other representations, a public local inquiry was held into Willesden's application for consent to a loan of £30,660 for cemetery works. Wembley residents at this inquiry invoked the provisions of Section 10 of the Cemeteries Clauses Act. 1847, which provides that a cemetery shall not be constructed within 100 yards of residential property without the consent of the owners and occupiers. If the area within 100 yards were excluded, about five acres of land would remain for cemetery purposes.
The Minister subsequently approved the Willesden proposals in principle, and though I led a deputation from the Birchen Grove Protection Committee to interview the then Parliamentary Secretary, my hon. Friend's predecessor, Wembley received no satisfaction. Wembley and the Protection Committee now threatened legal action in the High Court if Willesden proceeded with their proposals as outlined at the loan sanction inquiry. Once again Wembley repeated the offer previously made that Willesden should share with them the Carpenders Park cemetery site in Hertfordshire.
Though Willesden have not dropped their scheme they have certainly made a concession. They have revised their scheme and reduced their proposed area to about three acres of the site and outside the 100 yards distance from the houses. This may be a generous gesture and it may be an admittance by implication of the strength of the arguments put forward by Wembley, but the residents are still opposed, because if this cemetery is constructed they will be affected by the comings and goings of funeral processions.
That is the position today, and I believe that Willesden have the necessary Ministerial approval for the spending of £20,000 on the construction of a cemetery of about three acres in extent. It may be possible for extension to be made to five acres, but I am anxious to obtain the Minister's assurance that there could not be extension beyond this limit without new planning consent and owners' consent. It occurs to me that the expenditure of £20,000 for three acres seems uneconomical, and that Willesden would be well advised to think again and take up Wembley's offer of a shared cemetery in Hertfordshire.
There are many reasons why this area near the Welsh Harp and Birchen Grove should be preserved as an open space. Both Wembley and Willesden are entirely surrounded by urban development, and there is a grave deficiency of parks and open spaces in Willesden. In September, 1949, the Education Officer for Willesden asked the Wembley Council for assistance in the provision of playing fields for Willesden school children, as her existing

facilities were overloaded. Recently, Willesden reported to the Middlesex County Council that it is the worst served authority in the county for open spaces, per head of the population. Wembley is anxious that this site at the Welsh Harp should be incorporated into the proposed regional open space, and should be allocated for public recreation.
It recognises that a cemetery there will seriously injure the amenities of the district. The Wembley Council has for years required cemetery space for it own people, but it has gone into Hertfordshire. It still invites Willesden to join her there and to share facilities. If this offer were accepted, it would allow the Birchen Grove site to be included in the regional scheme for the development of the Welsh Harp. The boroughs of Wembley, Willesden and Hendon will then share a magnificent playground centred upon a fine lake and surrounded by an area of land providing extensive facilities for all forms of sport and recreation.
It is not too late to realise this more valuable scheme. In granting a cemetery site here, the Ministry appears to have acted in direct conflict with its declared policy, that new cemeteries for the London area should be sited outside the urban area. Wembley has been directed to Hertfordshire, in accordance with Ministry policy, while the Ministry at the same time permits Willesden to plan a cemetery in Wembley flanked by some hundreds of houses. There are about 500 houses within 200 yards of the site, and 250 within 100 yards.
From a town planning point of view, it is obvious that when sanction was originally given, more than 20 years ago, the position was entirely different from what obtains today. There were no houses then, and there was not the serious deficiency in open spaces. So many open spaces are required today by these local authorities. In view of these considerations, and as no construction of the cemetery has been started, I ask the Minister again to look at this matter. Willesden certainly needs a cemetery, but let her join with Wembley, whose offer remains open. If that is done, we shall retain this valuable open space in the Welsh Harp area not only for the residents of Wembley and Hendon, but of Willesden as well.

11.50 p.m.

The Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Ernest Marples): My hon. and gallant Friend the Member for Wembley, North (Wing Commander Bullus) has made his case persuasively for his constituents. He has been moderate in his tone and skilful in his manner; but I am not quite sure whether he has given the House all the facts of the history of the case, which would show that it has been gone into carefully and methodically. For the convenience of the House and of my hon. and gallant Friend I might perhaps go into the earlier history of this cemetery.
Although we may want open spaces, especially those of us who are young enough to enjoy them, it is necessary to have some areas in a town where one can dispose of the remains of the dead. In 1929 the Willesden Borough Council acquired a site of 50 acres on the north side of the Welsh Harp; and 22 acres—called Birchen Grove—were set aside for cemetery purposes. The then Minister of Health held a public local inquiry into the desirability of the construction of a cemetery on that site. There was some slight local opposition, but it was not prolonged, as there were scarcely any buildings in the immediate neighbourhood at that time. 
In 1932 the Willesden Council sold to Kingsbury about 14 acres adjacent to the site, for an open space. Soon after the purchase of the site Willesden declared their intention of developing the open space as a cemetery. There were hardly any houses built at the time. About the middle 1930s, when house-building got into its stride—as we hope that it will again in the next few years—quite a number of houses began to be erected in the area.
In 1933 the Willesden Council got loan consent for the layout works—sewerage, water mains and fencing for the cemetery. They started the preparatory work in 1933 and there was no objection from the residents in that area. The cemetery went to the area first and the residents went there afterwards. It is important that the hon. Gentleman should get that particular point correctly. It was not as if the residents went there first and the cemetery were being imposed upon them. The cemetery was

actually commenced long before the residents arrived.
In 1934 the new Wembley borough took over the Kingsbury urban district. In 1938 the Birchen Grove site was scheduled for cemetery purposes in the Wembley (Kingsbury) planning scheme. Nothing happened until 1948, when the Willesden Council announced their intention of completing and using the cemetery. This came as a shock to the local residents—and I can sympathise with their feelings, because when one has lived for a number of years in an area it is not pleasant to know that a series of funeral processions will pass one's front door. I have every sympathy with my hon. and gallant Friend in the particular distress caused to his constituents. The residents were out to stop it, and the Wembley Borough Council have ably assisted them in this struggle from the beginning. Now they are being reinforced by my hon. and gallant Friend, who has so skilfully deployed the case against the cemetery.
Let us look at the immediate history of the past few years. Wembley Borough Council made a tremendous attack. The 1938 scheduling of the cemetery was nullified by the 1947 Town and Country Planning Act and there were two attempts to get the Middlesex County Council—the new planning authority—to alter the future use of the land. That was in about 1950, and in that same year Willesden's application for planning permission to lay out the site was heard on appeal by the then Minister of Town and Country Planning, and the land approved to be laid out as a cemetery was reduced from 221 acres to 13 acres.
So the original purpose was 50 acres, of which the cemetery was to occupy just over 22, and then that area was reduced by the energetic and not unskilful efforts of Wembley Borough Council to 13. So it was quite a tactical, if not a strategic, gain for Wembley.
The opinion expressed by the Minister at the time was that a lawn-type cemetery, suitably screened from houses and nearby public open spaces, could be constructed without doing any harm. I have seen this particular land. When I went rather a long way round on my way to see the Cup Final recently I passed this area and


I noticed it; but I never thought that I should be asked to answer in an Adjournment debate about a cemetery in that district.
Towards the end of 1950, Willesden applied to the Minister of Health for loan sanction. Wembley further objected and a public local inquiry was held. Wembley residents, according to my information, turned up in large numbers. At this public inquiry, the Wembley residents rested their case on the legal ground that Section 10 of the Cemeteries Clauses Act, 1847, applied in this particular case. That Section says:
No part of a cemetery shall be constructed nearer to any dwelling house than 100 yards, except with consent in writing of the owner, lessee or occupier of such house.
Wembley residents, ably and skilfully led, contended that no part of the cemetery had been yet constructed and that these consents still had to be obtained. The Minister of that time approved in principle Willesden's application for loan sanction, in May, 1951. He approved it on the ground that in the absence of case law, it was impossible to decide definitely one way or the other on the legal interpretation placed upon Section 10 by Wembley. The Minister of the day thought the Willesden Council were within their legal rights in laying-out the cemetery. He did so because some of the works had been done in 1934, which did constitute construction of part of a cemetery, and because, legally, householders, having acquiesced so long, were time-barred from objecting.
In August, 1951, my predecessor as Parliamentary Secretary to the then Ministry of Local Government and Planning saw my hon. and gallant Friend and a delegation. I think it was made clear that Wembley's objections would stand or fall on purely legal grounds. If we devote ourselves to the arguments Wembley adduced at that time, we may get some idea whether they would be successful if they tried to upset the present arrangement. If Wembley are right and Willesden have no right to build a cemetery in this particular part, and if Wembley rest their case on legal grounds, surely the way for Wembley to proceed would be to obtain an injunction in the courts to restrain Willesden.
Only the courts can give a legal interpretation. It cannot be done in this

House. The House makes laws but does not interpret individual cases. Because of this particular action by Wembley, in invoking this Act, Willesden reduced, even further, the area they were to make into a cemetery to six acres. Although they obtained 50 acres originally, the amount to be used for a cemetery was about six acres.

Wing Commander Bullus: Is that the final word? Will there be nothing more than six acres?

Mr. Marples: The present application by Willesden is to build on six acres and what my right hon. Friend is concerned with is whether these six acres are a right and proper area for Willesden to use as a cemetery. It seems to my right hon. Friend that it is, taking into account the history of the case, and the decision of his predecessor. Any further application must be treated on its merits. If Willesden wanted to increase the area by a quarter of an acre, it would have to be considered on its merits. If they wanted to build on another 20 acres that would be considered on its merits, and it seems to me that that might be considered excessive. However, whatever they do in the future is hypothetical.

Wing Commander Bullus: Would it rest on fresh planning authority?

Mr. Marples: Nothing would be done unless it was approved under the Town and Country Planning Act, 1947, in conjunction with the Cemeteries Clauses Act, which Wembley Borough Council invoked.
The next point which my hon. and gallant Friend raised was that it is bad planning to have a cemetery at Birchen Grove. Surely the answer is that that aspect of the matter was exhaustively considered after the hearing in 1950 by the then Minister of Town and Country Planning, who decided that there could be no planning objection to the lay-out of 13 well-concealed acres. Willesden Council are now only building on six acres—that is, half what the then Minister approved.
With all respect to my hon. and gallant Friend, I would say that when any Government comes into power it takes over a going concern. It has to take over the situation as it finds it, and it cannot reverse everything decided by its predecessor. If the predecessor of my right hon. Friend decided that it was right and


proper for Willesden to build on 13 acres, and now they are going to build on six acres, it seems highly improbable that there are grounds for interfering at this stage, when they propose to build en less than half the area which they originally had in mind.
The next point which my hon. and gallant Friend made was that the residents have a legal right of objection because their consent was not obtained. I should like to keep off the legal complexities of this matter because the short, final and, I think, conclusive answer is that no part of the works with which we are concerned—that is the works on six acres—is within 100 yards of the residents. No one has a right to object, and no consents need be obtained.
I have gone carefully into the matter, of which my hon. and gallant Friend was kind enough to notify me in advance, and the Minister was advised that Willesden have a legal right to do what they propose, and accordingly he cannot refuse to consent, or deny them their rights at law. If my hon. and gallant Friend wants to deny any local authority their right he will have to alter the law and not merely interpret it because, administratively, it would be inconvenient to do so.
My hon. and gallant Friend's third point was that Wembley offered Willesden a share in their own cemetery at Carpenders Park as an alternative. At first sight, that seems attractive, but Willesden refused it. Frankly, they had every right to refuse it on the ground

that it would involve too much extra expense and trouble to their ratepayers to go there. If Willesden do not want to accept that offer my right hon. Friend has no powers to take over the functions of the local authority and force them to accept.
My hon. and gallant Friend considers that Wembley have had fair play all along. The cemetery has been reduced from 22½ acres to six acres, which is quite a fair achievement. The cemetery will be well concealed; it will be of the modern type—what is known as the lawn type—and can be made to look attractive, as opposed to some of the older cemeteries which are unkempt and a distressing sight, especially if one passes one of them late at night. The modern type is not unsightly, and it seems clear that Willesden have not only every legal right to carry out their plans but an urgent duty to their ratepayers to provide for their needs.
Willesden is a very overcrowded area and must have a ground reasonably near the actual area in which its inhabitants live. It is not a very wealthy area, and it is difficult for the people to raise the necessary funds to go out as far as Carpenders Park—

The Question having been proposed after Ten o'Clock on Monday evening and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Five Minutes past Twelve o'Clock, a.m.